Fall 2021 Gavel w links | Page 9

without the equipment . Rob Manly specializes in estate litigation at the Vogel Law Firm in Fargo . He shares Smith ’ s concerns with dividing the farm assets when trying to treat non-farming children fairly while also keeping the farm solvent . “ You have to do the estate planning in a manner where you don ’ t bankrupt the farming kid or put too much onus on them where they can ’ t keep farming . That ’ s where estate planners need to work through those issues with their clients ,” explained Manly , who is well-versed in farm life having grown up in New Rockford and attended law school at the University of North Dakota .
The Need for Tough Conversations and Transparency
Manly recommends lawyers encourage transparency with their farm clients so there are no surprises when their children learn what happens to the farm after they ’ re gone . “ The best is to let the kids know where things are going to fall when mom and dad are gone so there are no surprises . It ’ s the surprises that lead to litigation .”
The tough conversations on the front end , along with the transparency , can help avoid costly legal battles down the road . “ In North Dakota , we have to get around the passive aggressiveness , and that the kids will figure it out when I ’ m gone . You need to communicate with the children prior to passing , or before they get in such bad health there are questions whether they know what they ’ re doing ,” said Manly .
In addition to questions concerning testamentary capacity , the lack of transparency can lead to claims of undue influence . “ The best thing is for people to be transparent with their kids , or there could be allegations the farming kid took advantage of the farming parents into giving them a sweetheart deal , which is where you see the undue influence claims ,” cautioned Manly .
While many farm families in North Dakota may prefer to handle their own estate planning and farm succession , the risks of doing so are spelled out in the North Dakota Supreme Court ’ s recent decision in Hartman v . Grager , 2021 ND 160 , 2021 WL 3918888 . Ray and Patricia Hartman , husband and wife , owned land in Wells County . While they had five children , none of them took over the farm . In 2011 , Ray and Patricia ’ s grandson , Trent Grager , began renting the farmland . After a car accident in August 2016 left Ray with significant injuries that forced him to live in a nursing home , grandfather and grandson put pen to paper in the fall of 2016 , without assistance from a lawyer , to arrange Trent ’ s purchase of the farm .
Joshua A . Swanson is a shareholder at Vogel Law Firm in Fargo , where he practices energy law , construction and property law , and general litigation . Swanson chairs the firm ’ s recruiting committee and serves as a co-chair of Vogel Law Firm ’ s mentoring program . He ’ s originally from Maddock , N . D ., and attended the Creighton University School of Law .
In 2017 , Ray involved his lawyer in drafting a purchase agreement , but Trent failed to deliver his acceptance of the typewritten purchase agreement prior to Ray ’ s death in March 2017 . Eventually , in July 2017 , Ray ’ s estate sued Trent , who then counterclaimed against the estate . While the 2016 handwritten agreements between Trent and Ray were ultimately upheld by the Supreme Court , the case is a cautionary tale for farm families as to the myriad of issues and landmines involved in farm estate and succession planning .
“ One of the biggest messes is we get into family farm fights , and the kids don ’ t have Thanksgiving and Christmas anymore ,” said Smith . “ I always bring up you don ’ t have three kids , you have three kids with three spouses . You ’ re going to have three spouses that are going to hear three parts of the conversation , which makes it more important to come up with a plan .”
Manly agreed . “ Sadly , some people probably opt for the option where they can avoid the confrontation [ by not sharing their plans ]. When they do that , they ’ re potentially leaving an expensive , nasty mess for their children to sort through , and can leave their children with such hard feelings where they won ’ t communicate .”
Other Options to Balance Things Out
Smith and Manly both suggested ways to balance out distributions to the farming versus non-farming children to alleviate concerns of fairness . Whether that ’ s setting the value of the land as it ’ s assessed by the county , having the land appraised and giving the farming child a discount on the appraised value , or giving other financial assets or non-farm real estate to the non-farming children , a good estate planning attorney can walk their clients through potential solutions to avoid lawsuits splitting up the family . “ Another tool is life insurance ,” said Smith . “ Having mom , dad , and the farming child buy life insurance so the farming child has some money to buy their siblings out with .”
In western North Dakota , the farming parents may also consider treating the minerals differently and distributing those in a manner that takes the farm operation into account , assuming the farmer or rancher also owns the mineral rights .
At the end of the day , farm families can take proactive steps to avoid family feuds and ensure the ongoing viability of the family farm for future generations , including consulting with a lawyer and having a plan . “ When the bulk of the assets are farm land and farm machinery , and they want the farm to keep going , they need to take into account a plan that makes it cash flow somewhat fairly . It shouldn ’ t be for free , but it shouldn ’ t be for retail ,” concluded Smith .
Farmers confront the uncomfortable every day , whether it ’ s rough weather , tough markets , or workdays stretching from before sunup to well after sundown . Having a frank and honest discussion with their families , making a plan , and involving an estate planning lawyer to ensure the farm ’ s future from one generation to the next is one of the most important steps a farm family can make .
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