Equity and Sweat Equity

Des Moines Register:

When Varel Bailey and his fellow shareholders meet this month, the seven-member family board that includes his three children will focus its attention on one issue: Who should benefit from the financial success of the farm?
Bailey’s parents first began giving shares annually in the Anita, Ia., farm in 1966 and continued doling out stock equally to their three children during the next 40 years. While Bailey stayed on the farm and helped increase its value, his sisters left and now at least one of them wants to receive full value for her shares. But Bailey believes she is entitled to one-third of the value of their parents’ estate at the time he joined the operation — not a third of its value today.
As the 73-year-old crop and livestock operator prepares the 1,200-acre farm for the future, Bailey is working to determine the “fairness factor,” as he calls it, to reward his son, Scot,who has worked with him since 1990, while also fairly rewarding his two daughters who left the farm to embark on successful careers outside of rural America. Currently, each of his three children would receive a third of his shares.
“We’re working on a deal and saying, ‘OK, is there a way to calculate our son’s contribution to the creation of wealth that his two sisters didn’t participate in,’ ” said Bailey, who added that keeping most of the stock owned by people working on the farm is important for the long-term viability of the business. “Shares owned by distant relatives with little or no connection to the farm threaten the financial stability.”
The “graying tsunami” in rural America means that more farmers are being forced to decide what happens to their farm once they retire or die....The process is further complicated because most farmers reinvest any profits back into the operation, leaving much of their personal wealth tied up in the business through equipment and increasingly valuable land.

This shouldn't be an issue with my sister, who moved to the big city and never plans on coming back.  It helps that our family's farm isn't the lone asset for our family, so it is easier to deal with.  But for most farmers, this is definitely a big deal.  And with land prices where they are at currently, it is really tough for most folks to make a deal to take over the farm.