Father’s Estate Plan Leaves Many Unanswered Questions Relating to Gifts to On-Farm Heir

 

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Image by Claire via flickr.com

 

This post is not legal advice.

Many of you have farm succession plans or estate plans that may handle issues related to on-farm heirs and off-farm heirs.  But have you communicated decisions in these plans to both sets of heirs?  An interesting case out of North Dakota, In re Estate of Feldmann, addresses that issue.  In this case, the Supreme Court of North Dakota agreed that testimony showed the father had gifted all the farm equipment to the on-farm heir and was not apart of the off-farm heir’s share of the estate.  The on-farm heir was also entitled to the wheat crop growing on the inherited farmland.  The off-farm heirs were only entitled to proceeds from the wheat crop harvested at the time of the dad’s death.  Families should discuss these issues to make sure that everyone is on the same page, so heirs understand how the property will be treated at death (or when it is gifted to another heir) to reduce tensions.

Facts of Case

In Feldmann, the father had one son who appears to be on the farm and two daughters who appear to be off-farm.  The father and son agreed that son would farm dad’s land with dad’s equipment with dad keeping the proceeds from the farm.  This agreement was in 2004.  In 2009, one of the daughters overheard a phone conversation where dad said: “the farm equipment is all the son’s now.”  Father dies in 2011 with a valid will that left farmland to son and personal property to his daughters.  At the time of his death, a majority of his wheat crop was unharvested.

Issues Before the Court

The court had to deal with two issues:

  1. Was the farm equipment gifted to son?
  2. Proceeds from the wheat crop belonged to the father’s estate and not the son?

Court’s Decision

A valid inter vivos gift, or a gift made during one’s lifetime, requires an intent to give the property to the other party, actual or constructive delivery of the gift, and acceptance of the gift by the other party.  The farm equipment would have been considered personal property that the daughters potentially would have been entitled to if the court determines an invalid gift.

In looking at this case, the dad’s will had mentioned a list of property considered personal property, but the list was missing.  Also missing were tax documents that potentially would have demonstrated gifting of the farm equipment to the son.  The only evidence of the gift is the testimony of one daughter who overheard a phone conversation where her dad stated that the farm equipment was now the son’s property.  The supreme court considered this enough evidence to support the claim the farm equipment was a gift to the son and upheld the trial court’s ruling.

 

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Image by David Gunn

Typically, unharvested crops go with the real property.  Here the dad had an arrangement with the son that stated that son did the work and dad got the proceeds from the crops.  The lower court had ruled that the standing wheat crop passed to the son as a part of the real estate.  The harvested crop’s proceeds passed to the two daughters.  The supreme court agreed with this ruling and affirmed the decision of the lower court.

 

Why Care?

This case highlights what can happen when parties do not clearly state what is happening to the property upon the party’s passing.  Here the dad had an estate plan, but made changes (equipment given to the son) and did not let the other heirs know about the changes.  The change impacted the daughters’ share of the estate and you can see why one might fight over it.  That daughter might have felt that her brother was getting everything from dad and she was not being treated fairly.  The case highlights why communication is important in handling these issues to help preserve families after your passing.

To get more information on farm succession planning and estate planning, check out the UME page on farm succession planning at https://go.umd.edu/UMETransitions.

References

In re Estate of Feldmann, 2017 ND 255 (2017).

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