MSU Extension: What Will Be Your Legacy for the Next Generation?

This is one of a series of articles focusing on estate and legacy planning. The authors are Kaleena Miller, Madison-Jefferson County Extension Agent, kaleena.miller1@montana.edu, and Marsha Goetting, MSU Extension Family Economics Specialist, marsha.goetting@montana.edu.

An important goal for most Montana farm/ranch family enterprises is transferring land and business to the next generation. The process is challenging because it includes a complex web of economic, legal, and family decisions. “For some families, just the idea of getting started seems so overwhelming that they do nothing. Without realizing it, they leave it up to the state of Montana to decide who receives their property. And, that distribution may not be in the best interests of the farm/ranch family and business enterprise,” says Marsha Goetting, MSU Extension Family Economics Specialist.

In past years, when the value of a modest estate was subject to taxation at the state and federal levels, tax decisions often became the focus of attention. But now Montana inheritance taxes are no longer an issue because the 2001 Montana legislature ended them. And, with the federal estate tax exemption during 2024 being $13,610,000 for a single individual ($27,220,000 for couples), most families can focus on how best to pass on the farm or ranch to the next generation. They don’t have to worry that the property they have worked a lifetime to accumulate would have to be sold to pay state and federal taxes.

Some families avoid planning because they do not want to deal with the conflict that arises because of the differences among members in goals, values, and feelings about fairness and equity. Once the estate planning Pandora’s box has been opened, it’s difficult to close if one or more family members cause a “ruckus” about the process.

“For example, a couple of years ago, I received a call from an adult child who had attended one of my estate planning presentations. He was calling on behalf of his siblings with this concern. Their Dad had remarried after his wife (their mother) passed away a couple of years ago. Dad had retitled his ranch from sole ownership to joint tenancy with the right of survivorship with his new wife shortly after their marriage. His adult children have “concerns,” but Dad told them not to worry because he has written a will leaving his children the entire ranch,” said Goetting.

What Dad doesn’t realize is that upon his death, his new wife receives the ranch, not his children. Any property held in joint tenancy with the right of survivorship passes to the surviving joint tenant. The dad cannot undo the contract with his will. The surviving joint tenant, his wife, receives the property.

Is it any wonder the children are “concerned?” Their dad is unaware of the consequences of Montana's joint tenancy contract law. He has disinherited his children without realizing it, Kaleen Miller, Madison-Jefferson County Extension Agent.

MSU Extension has developed many publications designed to educate Montanans about estate planning. One is designed to help families start the estate planning conversation between generations. It emphasizes the interdependence of the family and the business rather than viewing them as two separate entities, said Miller, Madison-Jefferson County Extension Agent.

Younger generations often find it difficult to start a discussion about the farm/ranch transfer and succession processes because they fear older generations may perceive them as being overly interested in their inheritances. On the other hand, when older generations bring up the topic, younger generations may not be responsive because they do not want to think about their grandparents or parents dying.

Families who have been through the transfer and succession planning processes suggest that issues must first be decided individually. Next, these issues need to be discussed at the couple’s level. Finally, a discussion needs to start at the family level for each unit in each generation. If this is done before a discussion at the business level, the negotiation often goes ahead more smoothly, although not necessarily without times of tension or value and role conflict. The processes are more effective when all parties who could be involved in the transfer have an opportunity to share and express their needs.

Members of the older generation will still make the final decision, but without hearing the concerns of the other family members, they may make assumptions that are not necessarily true. “And, at the same time, members of the younger generation will realize that their concerns are being acknowledged and considered by the older generation,” said Miller.

Having a farm business meeting about transfer and succession planning can be very frustrating if individual members of the units within the generations have not decided what values and goals are really important to them—individually and then as a family. “The worksheets in the MSU Extension publication Transferring Your Farm or Ranch to the Next Generation provide each member of the older and younger generations an opportunity to focus their thoughts and examine their feelings about succession planning issues,” said Goetting.

Because of the strong bonds inherent with heritage, land, and lifestyle, generation transfers are more frequent in agriculture than in other businesses. When people work together as closely and for as many hours as they do in a farm/ranch operation, disagreements and conflicts are normal. However, unresolved conflicts can majorly impact the long-term success and viability of the farm/ranch operation. They certainly can have repercussions on any transfer and succession plan as well.

The older generation may conclude that no matter what is done, a member of the younger generation will be unhappy. However, the older generation should not let this stop them from making a decision about the transfer and succession plan. Members of the older generation have worked hard to increase the value of their business—it is their property, and, as such, they have a right to own and dispose of it as they think is right.

More information is available in an MSU Extension publication, Transferring Your Farm or Ranch to the Next Generation, https://store.msuextension.org/publications/FamilyFinancialManagement/EB0149.pdf. For those who do not have computer access, copies of all publications mentioned in this article are available from the Madison-Jefferson County Extension office at 406-287-3282.