Estate Planning for Farm Legacy Can’t Wait - Clint Fischer

Paul Yeager  Have you thought at all what you want done with your farm? Do you have a sibling that maybe isn't on the farm and you are, or maybe it's reversed? Maybe you have that parent that said that will be yours someday? Is it written down? Is it planned? Is it something that everybody knows what is supposed to happen when that inevitable call does come that a family member has passed. Hello, I'm Paul Yeager. This is the MToM podcast. We're going to get into a topic that I feel pretty strongly about, that I think you should be paying attention to, and that is estate planning. It doesn't matter if you're on the farm or off. What are your wishes you get to decide, as long as you write it down, and as long as you make your wishes known and you have gone through those proper steps, writing it down is different than just telling someone admissible in court or not. Clint Fischer is going to help us again. He is an estate planner. He has done many things in his career. He's also a past guest on this podcast. We're going to talk exactly why he is so passionate about making sure you plan to have that conversation, whether it's it might not be convenient right now in the middle of planting or harvest, but why would you wait on something that could be millions of dollars at stake, no matter what the size the farm is. So we'll get into that today in the MtoM podcast. New episodes come out each and every Tuesday. We've had some good ones here lately, so head on into the archives. But now let's talk with Clint Fischer in South Dakota. 

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Clint, I always think when it comes to planting or harvesting, a farmer's mind certainly has time to think, to wander, to ponder. Do you find that to be the case?

Clint Fischer: Absolutely. One of the things that ought to happen is the farmer needs to be pondering about what's happening with their estate plan and what's happening with the next generation.

Paul Yeager: Because whatever breakdown happens, it might turn them into a little frustration. And they got to think, why on earth am I doing this? That's one inspiration another is, you know, I think it's time, because so and so is here helping me now or C, I don't know what I'm going to do, but I got to think of something. I mean, is that fair?

Clint Fischer: That's fair. That's fair. So Paul, the other day, I had a new client come in, and there, he's a sixth generation farmer from Minnesota, okay, and his young son, he's hoping to be the seventh generation. What struck me, what really stood out to me as our conversation about, how are we going to pass this thing down to the next generation? How are we going to deal with tax issues and all the things that we talk about in the estate and succession planning world. What struck me was his knowledge of the heritage that the farm that he owns and manages and runs was so deep and so precise to the point where he's actually kind of got a little shrine up on his on his family farm to then, you know, kind of pass that legacy down to his son and his two daughters, who probably aren't going to come back to farm. But yeah, so those are the types of things that in my profession as an estate planning, succession planning attorney, I really look at who is most capable, who is most viable, to structure their operation in a way that it can sustain generational shifts. And this type of human is definitely set up for success, because, well, one he's meeting with me so that we can put together a plan, right? But then number two is he knows the past. He knows the history of his operation. And so as we're sitting in the tractor, or, you know, this summer, as we're sitting in the sprayer, spraying things like that, I think it might be prudent to just kind of mull over what is the history of our operation and how are we going to pass that legacy down, then to the next generation.

Paul Yeager: That sounds like an ideal situation that someone is talking. The one who has the asset is, is there to talk? How many times you've seen it where the person who has the asset or the is the fifth generation? They are in a position they cannot have a good conversation, because either they are in a hospital bed or they're already have already passed,

Clint Fischer: Yeah, yeah. About half of my time Paul is spent dealing with the estate administration side. And what that means is, when somebody passes away, something has to happen, right? Something happens with the property, something happens with the farm. And so about half of my time is spent dealing with all of those kind of moving pieces. What strikes me and what is just abundantly clear, those families who kind of thought this through ahead of time, who planned ahead, have such a better path forward for the next generation, for the kids, whether they're on farm kids or off farm kids, it doesn't matter. Everybody brings into the estate administration side baggage, right? And so when they bring in baggage, that means that, you know, Dad told me that I'm going to get the farm. Well, let's look at what the documents actually say. And so if there are no documents for us to look at, then we're up to, what is the plan that mom or dad left for the next generation, or the grandkids, or, you know, going forward. And so half of my time is spent dealing with farmers and farm families on kind of the that side of of things where maybe they had a good plan, and then things just generally, are much more easily distributed and handled, and then also those farm families that didn't have a new plan. And then that's where we see the stories and the kind of the train wrecks, you might say. And so part of my time is spent there, and the other part is spent on the planning side, right? And so I think it's really valuable for me as an estate planning attorney, to know. All right, here's what we're going to structure today, and that might not come into fruition for 2030, years, but when that time comes, are we actually communicating our wishes to the next generation, because if we're not, then we usually see some issues, right? And so I think your point, Paul, that communication factor one ought to be in writing through a properly done estate plan. But then two, it's just every single day, talking about, hey, here's what our plan says and, and here's what you're gonna get as the the on farm kid, the successor generation, and here's what's gonna happen with the rest of the property, you know, with your siblings who are off farm. And just that communication factor is really important.

Paul Yeager: Well, we also talk about managing expectations, understanding what everybody's thinking they're going to get or entitled to entitled I'm guessing that word gets you in trouble sometimes,

Clint Fischer: Oh, absolutely, absolutely, you know. And it comes back to the age old question of is, are we going to do a plan that is fair? Are we going to do a plan that is equal? Are we going to do a plan that is what I call equitable, right? And and so oftentimes in the farming world, we're saying, Hey, we are land rich, cash poor, and that's just, I mean, I'm not telling anybody anything new here, but if that's the case, and we want this farm to succeed for the next generation and future generations, well, we have tools that can accomplish it. The worst thing that a farm family can do, who is land rich, cash poor and has an on farm child and then some potential off farm child children, the worst thing they can do is to have no plan. I say that because the state, whatever state you're in, has a default plan for you, and that default plan generally says, All right, we're going to split things equally. That's where we see issues, right? That's where it is a to me, and this might, you know, a. Ruffle some feathers, but to me, it's a lack of planning on the owner generations side, for not preserving the family farm in a way that it ought to be preserved. It's a lack of actually talking to folks who can put these plans in place, such as myself, to make sure that that farm continues for the next generation, and then, you know, going forward. And so when I say the worst thing that can happen is is having no plan at all, I actually mean that because, because we run across that every single day, and I talk to farm families who have been hurt, who have lost out on opportunities because they are the generation that is on the farm, but procrastination or The financial difficulties, or whatever the reason might be, the owner generation just didn't go forward with putting a plan in place, and now we're dealing with the repercussions the next generation down. And man, I just if I can say one thing, it is, I'm trying to avoid that, right? I think that I have a position and a place and an ability to try to avoid that, and so I'm just going to shout that from the rooftops. I really am that that is so important.

Paul Yeager:  All right, we're going to go back to fair and equitable in a minute, because that is an extremely powerful statement. I want to hit again, but I want to follow up right there what you just said, of plan, not plan, because whatever the state they've been, you're not the first time that this has come through. So South Dakota, Iowa, Minnesota, they know how they're going to handle it, and it is not going to be something everybody that anybody's going to like. But I want to ask about the generational question that you're kind of bringing up. Are you finding? Have you found 70 plus? Doesn't talk about it. 60 to 45 do talk about it, 25 and under. Talk about I mean, are you finding there are certain generations or ages that are more apt to plan than not?

Clint Fischer: Yeah, yeah. I mean, I, you know, I hate to boil everything down into a generational you know, you're born on this date, and then, you know, this is your generation, and now you're lumped in with everybody else. But what I would say is, because historically, farming and the farm legacy seemed to have been more of a lifestyle and more of an influence point in generations that what we're kind of seeing is some of the boomer generation are less inclined to say, I really want, I want to preserve this thing for the next generation, and that next generation, so called millennials, or whatever Gen you're talking about, might be dissuaded from Taking over the farm. And there's a couple of reasons for that. One reason is this, this farming operation hasn't necessarily been all that fruitful from a financial standpoint, right? And it may not have been this lucrative business that the owner generations have sweat and toiled and dealt with. The other thing that I oftentimes see is that the work-life balance called the lifestyle of the farm. I think that most people who are watching this are going to be in the same camp as me, who grew up on a small farm, it's the lifestyle, the rural attitude, the rural lifestyle, is so important. And I think that the values and the character that that builds are just incredibly important. However, a lot of my generation, and then, and then the next generation say, Well, I saw Mom and Dad sweat and toil and pour in their whole entire life for a meager living. And they didn't have necessarily this what we would call in today's world of work life balance. And so without laying out a path that says, here's how you can preserve the family heritage, the the family farm legacy, while also having a legacy and a work life balance that you can really bring to. Your wife or husband, be in laws bringing them in. I think it's so important that part of the planning process kind of lays that out right. Lays out here's the path forward for this generational operation. Because so many times I have, you know, friends from college, friends, I mean, friends who I talk to every day, who came from a good sized operation, and they said, No, thank you. There's no way that I want to go back home and take over this operation, because mom and dad worked their tails off. And, yeah, they got lambs, and that's it. And so I'd much rather be in the thick of things and the community and the, you know, the city. And so I think that part of agriculture in general has done a poor job of communicating the values of rural lifestyle and why it is really beneficial for the next generation to take over the farm.

Paul Yeager: Um, yeah, go ahead. Well, let's go to, let's go back to those friends. Let's make it simple, simple math. Four of them. There's four siblings. Uh, three have gone into town. One is still on the farm. How do you make something fair and equitable for those that are involved and not involved from a family planning process,

Clint Fischer: Yeah. First and foremost, it starts early. Okay? It starts early. If we're in our 70s as the owner generation, and we're now trying to make things equitable. It's a lot more challenging to get the family farm to survive if we start early enough. We can invest in outside investments. We can we can put into place some life insurance policies, things like that, that on the dollar side of things would kind of balance out the scales. Okay? And so starting early on, that whole farm succession plan is so important, it's incredibly important for that reason, the fair versus equitable. Now, the other thing to consider is, you know, I'll talk with families often, and and they say, Well, you know, John was, he came out of high school and he, you know, he worked with with dad the whole time, and he and he helped build up the farm. And the first question I ask is, was he paired? Was he paid a fair wage? If their answer is yes, well, then is he really entitled to anything more than the off farm kids? I don't know. That's every family's kind of decision to make right now, if he was promised at some point in time, which oftentimes happens, if he was promised that, hey, Junior, someday this will all be yours, and you just keep working and you just, you know, put up with all the the shenanigans that that is farming with, with mom and dad, then you're going to be rewarded someday. Well, then I think that we ought to be looking at that throughout your estate plan, okay, knowing this whole time that we can, we can have off farm investments, off farm dollars, go to our farm, off farm kids, we can have on farm property. Than just either go to the on farm kid or what I usually end up doing, because the fair versus equal thing is a very important component to family estate planning. What oftentimes happen is we actually have tools that say, all right, when mom and dad pass away, a lot of this property gets dumped into, say, a trust, and that trust then, equally benefits the kids. But we have some restrictions, right? We have some carve outs for the on farm kid, and so we're benefiting the on farm kid while maintaining kind of that family cohesion throughout the planning process. And so there's a lot of tools to make that happen. And one thing I would say Paul is, every single time I meet with a fire family, it's unique. It's different, because there's different dynamics that come into play every single time I meet with a farm family. Sometimes we have children who are potentially, you know, at risk of substance abuse or divorces or things like that, and we have to factor all those components in. And then we look at. It's what is it really? What are we trying to accomplish? If the number one goal is preserving that family farm, well, we can utilize legal entities to help reduce things from a federal, state tax perspective. We can use some trusts to kind of make sure that we're actually accomplishing the goals. And Paul, just every single one of them is unique and different. The main thing is, if you're not even thinking about a succession plan, well you're kind of behind the ball, right?

Paul Yeager: All right. So planning to plan is step one. Two is physically going in and having that conversation, or even looking at documents that I'm sure that you you've had written things I've read your commentary for years. Clint about, you know, to help us think through it. Okay, we need to get through planting, and then we need to get through spraying. Wendy, when do you have people coming in the most to talk to you? Is it a summer thing? Is it a winter thing?

Clint Fischer: Paul, I love that you just explained that number one and number two, excuses to procrastinate on estate planning. I love it.

Paul Yeager: I'm here to help. 

Clint Fischer: I have a lot of farm families who we put together a plan, and then the kind of next step is for them to come in and sign documents, right? Because there's specific way we need to get things signed and, you know, make sure everything is on, you know, above board. And the very first thing that I hear is, Well, you know, jokingly, of course, can you just plan it when it's rained? So we can just come in on a rainy day and I go, you know, some of these farm families have millions and millions and millions of dollars of land or other assets. And so for you to prioritize, for them to prioritize, coming in to sign documents that passes that down to the next generation in a tax efficient manner that is somehow second tier to worrying about what the planting is done on that one single day for two hours. That's frustrating, and I think that's just a poor messaging from my world, from the estate, the importance of the estate side of things, and so I'll answer your question here in a second, Paul, but I see more action during the winter months. You know, I am so I'm licensed in Minnesota and South Dakota. Our firm Thompson law is licensed in or, you know, we have Attorneys Licensed in Iowa, Minnesota and South Dakota, and so, you know, a lot of it is row crop farms, and a lot of it is families who own some type of a business, and they're all seasonal, right? And so winter time, yeah, we're going to see more action coming in now, hopefully, what I try to stress is the importance of your plan getting signed and in place is paramount to sorry, even getting some fertilizer sprayed on this particular day. And so I think we have in the egg industry, we have blinders on particular things, and and, and tend to procrastinate on specific topics, just because, you know, that's that we don't see an immediate ROI. I think that's one of the main things Paul that I see come across, is for me to spend five to 10 to $20,000 depending on the estate plan. I don't see an immediate ROI, right? So, so, so I write the check, I sign all the papers, I get this big binder that says, here's the estate plan, and then nothing happens, hopefully for a long time, because you're still alive and you're managing your property and and hopefully nothing actually happens to trigger that estate plan coming into use. And so it might be 510, 2040, years until that actual plan gets utilized, but when that time comes, it's hard to kind of community. Kate, the value of previously putting together the effort and the time and the energy and the commitment to establishing that plan that we're going to see the fruits of that labor way down the road. And so I can go out and I can buy a brand new x9 combine, and I can go deep into debt for it. And guess what? I get to see that combine tomorrow. And so now I can see here, here's what I actually invested in, right in the estate planning world, in the farm succession world, we're trying to build plans that are lasting for not only this generation, but the following generation and going forward. And so I think it's, I think it's difficult, and I don't think we do a great job. And I'll, I'll want myself squarely in that camp of not doing a good enough job of explaining, hey, we're talking about saving on hundreds of 1000s of dollars of taxes with your plan. Maybe we ought to make this a priority, right? Or, you know, things like that. 

Paul Yeager: So you can set the date and get it done. Then, in 10 years, you go in on December 1, you can set the date then, but you have to get the ball moving now. Yesterday is too late. 

Clint Fischer: Yeah, you got, you got to get the ball moving. What I would say is, I always recommend, every three to five years, let's dust off the current plan, because there's two things that we're guaranteed to know are going to happen. One is there's going to be changes in the law. The legal changes are kind of ever happening. And I mean, for instance, Iowa, the first of this year, just four months ago, abolished the inheritance tax, and that's a big deal. So kudos Iowa for all the farm families who don't have to pay that tax. Now you know so that. So that's a big deal. That's a big change, and it may or may not impact your estate plan or your succession plan. The other thing that we know for sure is family dynamics change because your estate plan, your succession plan, is not immune to divorces and new children and new grandchildren and deaths in The family, those things all impact. What is that current plan? And so therefore, you know, I say three to five years, let's, let's dust, let's pop the hood, let's dust it off. Let's look at, what is the plan? If there is no plan, well, shoot, let's get one in place. And then finally, after that, we're looking at, okay, maybe there are no changes that need to happen. But guess what? At least we looked at it and we have that peace of mind that our new current plan is, or excuse me, our current plan is going to work for the next three to five years. And so I just really encourage the idea that, okay, we did all the hard work, we got a plan in place, and now it's done, and we never have to look at it again. 

Paul Yeager: No, that's nonsense, right? And when it's on paper, it stands up in court when it's written down versus back to your reference from a few minutes ago, Junior, someday this is all going to be yours. That's not really admissible, zero versus if it's written down. 

Clint Fischer: Paul, I just had a conversation this morning with a guy who said, you know, my mom always told me that the wishes were for this quarter of ground to go to me and I think all of the kids, all of his siblings, were on board with that. And I said, that's great, that that's what your mom had said. What is the trust actually say? Turns out the Trust says, No, it goes evenly between all the kids. And he said, but this is what mom always told me, was this quarter Ground goes to me. I said, you know, I hate to break it to you. That's not what the documents say. That's not how the court would view this. Therefore we need to distribute appropriately pursuant to your mom's written wishes. And Paul, I see that way too often, and so I think it's so important that we, you know, work with an estate planning attorney or a succession planning expert in. However you want to look at it, just put things down in writing, because mom told me so, or dad said this, someday this will be mine. Does not hold any water when it comes to people who are distributing property to the next generation. And I see it too often. So that is a big cautionary tale. 

Paul Yeager: Is it admissible in court? And it doesn't matter if you're talking about splitting a goldfish or splitting 4000 acres.

Clint Fischer  

absolutely, absolutely and unfortunately, there's usually a beneficiary. So that's somebody who would receive some kind of a benefit out of an estate who is going to challenge that because they don't have any ties, they don't have any emotional connection to the farmland. And so if it's not detailed in your estate plan, they're going to challenge whatever you claim mom or dad said. 

Paul Yeager: And I've seen plenty of movies. We've all seen the movies in the TV shows where, well, dad changed the will right before he died, or that's what was that's and that's challenge. And again, back to the gold Fisher, 4000 acres. It is still when you are talking serious dollars on land or equipment and feelings are heightened in that situation. Take the stress out of that. You'll still be able to have Thanksgiving dinner with each other, if it's I'm doing what mom and dad said versus I'm just going to let some cold judge six counties away decide what's best for our family.

Clint Fischer: Yeah, Paul, what I would say is, when I sit down with a farm family or any family for that matter, one of the first questions I ask is, you know, what are your goals? What are we trying to accomplish for this estate plan? 99 out of 100 times. The first one is, I want to provide for my spouse. Okay, very fair. I get that 99 out of 100 times. The second one is, I don't want my kids fighting like I had to fight. I want Family Harmony, after all is said and done. Well, if that's your first or second or third goal, then let's make sure that we have a plan in place that accomplishes that goal. And this is where I kind of get on my soapbox and go, you just told me that's your goal. Let's make it happen, whether that's with me or whether that's with anybody. I don't care just if that is the goal. I think it is such an appropriate and such an important goal, especially when we talk about, how do we preserve family farming operations? Let's make sure that we take into consideration all of the different aspects of on farm kids and off farm kids, and what we talked about earlier, fair versus equal versus equitable. Let's build all of that into your plan so that what you worked strived for, fought for blood, sweat and tears, and this farming operation is going to survive for the next generation. Because, frankly, the alternative is the auction company comes in and sells things, yeah.

Paul Yeager: And, and with an auction, everybody can think that that's going to be this great, huge payday, but more times than not, you see that combine gets sold, and you're like, that is a steal. There's no way you know. And and that goes with land. It goes with equipment, all right. Clint, before you get off your soapbox, what last thing do you want us to know when you're up there before you step down and we wrap this up. 

Clint Fischer: I want everybody in the farming world to know that there's more. There's more to life than just farming. Okay? And I think what I try to bring to the succession planning process, the SD planning process, is knowing and documenting that, hey, we have other goals and ambitions and family values than just the farm operation. Okay, but part of, and this might be the cynical side of me that says a lot of what we do is tax avoidance and tax planning. Okay, and so we need to do things that are making sense and leaving flexibility for the surviving spouse, then for the next generation regarding tax. Planning regarding how are we managing these assets going forward? And so I think part of that comprehensive transition estate succession plan is instilling those values into your kids that this is what we want to see happen, whether or not our plan specifically and explicitly says this is what we need to have happen. These are our wishes, and that's really what our goal is, what my goal is as an estate planning attorney, to capture those wishes, to pass it down to the next generation. And on that note, I am yet to meet somebody who says, you know, I don't think family farms ought to be preserved. I've never heard that from somebody. Now you might be, you're listening to this, you're watching this. You might be in that camp that says no, family farms are disgraced and should not be preserved. I haven't met anybody like that. I come from a family farm that is really my goal, is to preserve that for the next generation. And so I think whatever we're doing, whether it's running the farm business or deciding on what crops to plant in these acres, making major decisions about renting or buying farm route, things like that, I think in the back of our mind we ought to say, how is this going to impact the next generation, and is this going to further the goal of preserving the family farm operation? That's what I would say. I would step off by so fast.

Paul Yeager: I greatly appreciate you stepping on and helping us out. Clint, I always I enjoy our conversations. I look forward to it. Thank you for your patience with me and trying to work this out.

Clint Fischer: Appreciate it, Paul, and happy to be on whatever you want.

Paul Yeager: All right, Clint Fischer, thank you so much. Thank you. Head to Clint fisher.com for more information, and also, we'll see you next time on The MTM podcast, New episodes come out each and every Tuesday in audio and video form feedback for me. Send me an email, markettomarket@iowapbs.org.

Contact: Paul.Yeager@iowapbs.org