Q: My dad plans on leaving the family farm to me and my sister. She isn’t great with money, and neither of us are farmers. There is an old farmhouse that needs work and some land, but it doesn’t earn a profit—just enough to pay the taxes and house expenses. In order to keep it in the family, I’d need to take out a $500,000 mortgage to buy my sister out. What are the fair options?
—Karen Tennant, via email
A: Why is it so important to keep this farm in the family? That is the most important question you need to ask your father, says Elaine Froese, a business coach who works with farmers. You don’t have the skills to operate the farm, or the money to finance it, which will place a real burden on your shoulders and an even bigger one on the next generation. You might also have a better use for an inheritance beyond keeping it tied up in the farm. Froese argues that, “a gift is not a gift if they cannot do what they please with it.” So there is no simple answer to your question, and the notion of fairness is subjective. One option might be to sever the land and keep just the house in the family, reducing your mortgage. The second option is to sell the farm after your father passes, and split the estate. Froese recommends that you understand all the emotions at play, including any prejudgments you might have made concerning your sister, so you can come up with the best possible solution for everyone involved.
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