David L. Marrison, Extension Field Specialist, Farm Management, The Ohio State University
One of the core memories of my childhood is reading the Popeye the Sailor Man comic strip in the daily paper and watching the cartoon on Saturday mornings. Many of us remember Popeye, Olive Oyl, Bluto, and little Swee’Pea. But it was another character, J. Wellington Wimpy, who left an indelible impression on me.
Wimpy was known for his love of hamburgers and his famous line: “I’ll gladly pay you Tuesday for a hamburger today.” Of course, Tuesday never actually came, and Wimpy rarely paid for his tab.
I think of Wimpy often in my work with OSU Extension, especially when farm families discuss sweat equity. Too often, the successor generation is told, “We can’t pay you what you’re worth, but we’ll make it up to you later.” Unfortunately, later in these situations can be just as elusive as Wimpy’s Tuesday.
Sweat equity generally arises when a child contributes labor, management, or value to the farm business without receiving compensation equal to that contribution. If there’s no clear plan in place, well‑meant promises to “square things up later” often slip through the cracks.
As a rule, avoid promising to make it up later. As time passes, memories fade about how much sweat equity was given or how it should be valued. Sometimes, one parent mentally tracks the underpayment and plans to fix it in their estate plan, only to pass away before doing so. The surviving spouse may have no record of the promise, eliminating any chance of honoring that Tuesday repayment. This can lead to frustration, resentment, and conflict within the family.
So, what can you do if you truly cannot pay the next generation what they are worth? If this is the case, track it and work with your attorney to include clear, written provisions for sweat equity in your transition plan. Documentation, not verbal promises, can help keep things fair. Written documentation also helps avoid misunderstandings among siblings and provides guidance to attorneys, executors, and surviving family members.
Consider this example: Johnny Holstein could earn $65,000 a year working as an assistant herdsman for a neighboring 1,000 cow dairy. His parents’ 55 cow tie‑stall operation can only afford to pay him $50,000, even though he has the major responsibility for milking, breeding, maintenance, and herd records. If benefits are equal, his opportunity cost is $15,000 per year. Over 15 years, that totals $225,000. If the parents wish to treat their heirs equally, the first $225,000 of the estate could be distributed to Johnny before the remainder is divided among all siblings. This isn’t a bonus, favoritism, or extra inheritance. It is a compensation correction.
A key component of this conversation is first knowing what the true compensation is for each member of the farm family. Compensation is more than wages. It also can include health insurance, housing, meals, in-kind or paid childcare, vehicle and fuel, utilities, and/or free meat or other farm products. Creating an annual compensation summary for each family member helps ensure transparency and reduces misunderstandings.
Not all sweat equity comes from accepting below-market wages. It can also arise when the farm grows substantially due in part to the efforts of the child who returns to the operation. Consider another scenario: Sarah Jersey returns to her family’s 150 cow dairy after college and works alongside her parents for 12 years. During that time, she takes the lead on reproductive management, improves pregnancy rates, implements activity monitoring technology, and develops protocols that increase milk production and reduce veterinary costs.
As a result, the dairy grows from 150 cows to 350 cows and significantly increases its profitability and strengthens the farm’s balance sheet. Sarah’s compensation was fair for her labor, but her management decisions and leadership helped create much of the farm’s growth. In this case, sweat equity is not based on underpaid wages but on the value that she helped create in the business. Families should discuss how much of that growth, whether in equipment, land, livestock, or overall net worth, should be attributed to the heir’s hard work.
And don’t overlook the nonbusiness contributions of each heir. These may include transporting parents to medical appointments, managing household needs, or offering in-home care. These tasks have economic and emotional value and should be part of sweat equity conversations.
Sweat equity is one of the most misunderstood and most emotionally charged issues in farm transition planning. This article is only a quick look at the issue. Valuing unpaid labor, tracking contributions, documenting promises, balancing fairness among siblings, and aligning sweat equity with estate and business structures are all deeper layers that require thoughtful discussion.
If your family is wrestling with questions about sweat equity or transitioning the farm, I encourage you to attend one of OSU Extension’s “Planning for the Future of Your Farm” workshops. Learn more at https://go.osu.edu/farmsuccession
These conversations shouldn't wait for "someday," and they certainly should not depend on a Wimpy style promise to pay on a future Tuesday. On successful farm transitions, Tuesday is put in writing today.
References:
Goeller, D. J. (2008, October 22). Putting a value on "sweat equity." Cornhusker Economics. Department of Agricultural Economics, University of Nebraska-Lincoln. https://digitalcommons.unl.edu/agecon_cornhusker/396
Krultz, J. D. (2022). An analysis of three common sweat equity arrangements in family farm succession planning (Master’s thesis, Kansas State University). K-REx, Kansas State University Research Exchange. https://krex.k-state.edu/server/api/core/bitstreams/517891df-9fe5-470b-b78c-2548fca987ad/content