My son is pressuring me to give him the farm. Immediately. But I want it to go to my grandchildren. What should I do?
Q: I need help navigating my situation with my son. It’s a pressing situation where he wants me to give him the farm. He wants it immediately.
Of course, there’s a backstory. I previously foreclosed on my son when he and his wife borrowed money from me to build the farm. When he divorced, I got the farm and paid him off with cash as he needed it. But I didn’t have all the money I needed to pay him off. So I took out a loan.
He wants me to give him $500,000 or give him the farm
Now with the crash he believes is coming, he wants money to invest and be independent. It is very stressful for both of us to be tied together financially. He wants $500,000 or for me to sign over the property to him.
He now has a new partner and I believe she’ll get everything when he dies.
My concern is how to protect his kids from losing their inheritance. My son does things with a handshake. There’s nothing written down. He runs the farm and I’m concerned about liability issues he may face. He might get sued for something that would result in giving the farm away to pay that debt.
What should I do? The attorney I talked to doesn’t like the idea of giving him the farm but he doesn’t know anything about the tax implications. There are so many income tax issues relating to the ownership and business of the farm, and then there are the real estate tax issues if the farm stops being our homestead. I have a low income and basically live on Social Security.
I’m at a loss to know what to do next. What do you think we should do?
Attorneys can help with farm issues
A: We’re glad that you reached out to an attorney because you’re dealing with a host of complex family and financial issues. Unfortunately, you picked someone who doesn’t have the expertise you need to sort through the myriad of financial issues you’re facing. You’ll need different help, and we’ll get to that shortly.
It looks like the attorney told you not to give up your ownership of your farm. Okay, but was there any other advice provided? Did the attorney lay out any other options?
Don’t give the farm away if you don’t need to
Let’s start with the obvious: You shouldn’t be pressured into doing something that you don’t want to do. We don’t fully understand the history of your financial relationship with your son, but it appears to be rocky. Foreclosing on him, even if it was the correct thing to do, probably didn’t help.
You appear to own the property now, though it’s confusing why you would pay your son anything at this point. In a traditional mortgage setup, the farm would have been the collateral for the loan you extended to your son. When he stopped making payments, you took back ownership of the property. The fact you let him continue to live there and farm the land should have been seen as a bonus by him.
Instead, it sounds like he’s demanding $500,000 to leave the farm. Our questions: Is the farm even worth that? Why would you consider paying that kind of money if you already own the land? And, why have you been paying him cash since the foreclosure, other than because you wanted to help?
There are other options than giving the farm away
You should have other options available to you: You can sell the land and use the money to pay off the loan and augment your own retirement funds. You can lease the land to neighbors, who would hopefully pay enough to cover your expenses. Or, your son could get a mortgage and pay you for the farm outright.
If you’re worried about who will get this land after your death, you might put the property into a trust, naming yourself as the beneficiary with your grandchildren as the secondary beneficiaries. You’d control the trust while you are alive and can allow your son to have the right to use the land and farm as long as he lives there and can farm the land. At some future date, the farm and the land could pass to your grandchildren. These and other details will need to be settled before the farm can be put into the trust.
Given the complicated family backstory, we’re wondering what you didn’t tell us. For example, why would you consider acquiescing to your son’s demands? Did he put up some cash for the venture that has now been lost, perhaps a sum greater than the money you paid him since the foreclosure? Are you concerned your son may be ill? Is that why you are worried about his new partner inheriting everything?
While we appreciate the details you listed about the farm, its history, your relationship with your son and your wish to protect the farm for your grandchildren, it’s time to resolve this mess and put your mind at ease. You need to sit down with an experienced attorney – perhaps even a team of qualified professionals – to help you sort through the issues you face and set up a plan that will take you through retirement.
Build an estate plan centered around the farm
First, you’ll need an attorney with experience in real estate and estate planning, who also has expertise in federal estate and income tax laws as they pertain to real estate ownership and transfers. If one attorney doesn’t have the requisite knowledge and experience, then find an accountant or tax attorney who can help with the tax questions surrounding the property, foreclosure, and your estate.
To find qualified professionals, call your friends, accountant, relatives, banker and the bar association near where you live. Ask for referrals to attorneys who handle these sorts of concerns and do advanced estate planning. Someone who just handles simple wills and tax filings might not have the experience to deal with a situation this complex. You need people who have seen this movie before and can help you strategize a nuanced solution.
There’s land and there’s love. Don’t confuse the two.
Sorting out the relationship between you and your son may take more time. So, focus on what you control – the farm – and what you want to do with it. And remember, money doesn’t buy love. Good luck.
Read more about real estate and family:
Sign up for Ilyce Glink’s Newsletter: Love, Money + Real Estate