The Nickerson Family Splits Up to Stay Together
When Norm Nickerson mustered out of the Army in 1960, he and his wife Phyllis returned home to Hardee County, Fla. about an hour east of Sarasota, bought land and started a dairy farm with 27 Jersey cows.
Sixty years later, four of his now adult grandchildren—Courtney Campbell and her brother Logan Nickerson, and Brittany Nickerson-Thurlow and her brother Holden Nickerson —are owners and partners in enterprises that encompass four dairies, 4,600 cows and about 2,700 acres of owned and leased intensively-grazed pasture.
All of it, the grandkids say, is testament to their grandparents’ foresight in growing the business and passing those farms first to their sons and now to their grandchildren. None of it was easy. But the model for the transition was established by Norm and Phyllis, and has been followed through five different business reorganizations. Here is their story:
Norm and Phyllis started a family in the 1960s, milking those 27 Jerseys and eventually growing the dairy to 120 cows. In 1984, two of their sons, Joe and Chris, partnered with their parents. The farm was re-organized from Norm Nickerson Dairy to Norm Nickerson and Sons, Inc. Then, in 1997, the family formed Nickerson Brothers LLC. This new entity was used to transfer the business ownership solely to Joe and Chris. It allowed Norm and Phyllis to gradually move land, facilities, equipment and cattle through allowable estate giving rules under the Unified Credit (UC).
Allowable UC credits were modest in the 1990s. “Our parents started giving us shares in 1997 and we completed the transition in 2012 to where our parents didn’t own anything in the dairies,” Chris says. “It took that long to get everything out of their estate and into the LLC.”
“The only thing our parents asked is that they wanted the same pay check that Joe and I were drawing,” Chris says. “If we got $50,000 per year, they got the same wage. They received paychecks and were treated as owners for the rest of their lives.”
Joe and Chris continued to grow the enterprise, making their largest expansion in 2003 building Ten Mile Grade Dairy and peaking at 5,000 cows in 2006.
In the meantime, Joe and his wife Marlene started a family. Their two children, Courtney and Logan, took an interest in the business. Chris and Melinda also started a family, and their two children, Brittany and Holden, also wanted to be dairy farmers. All of the kids started working on the dairies as teenagers.
By 2017, the four kids were ready to enter ownership. The decision was then made to split the enterprises into more manageable sizes. “You’ve got to keep breaking it down or it doesn’t work,” Chris explains. “It’s hard having cousins telling cousins what to do. It took us two years to figure out how to do it.”
They split Nickerson Brothers LLC into two entities. The first, Nickerson Cattle Company LLC, includes Ten Mile Grade Dairy, 2,500 cows and 1,700 acres. The second is Nickerson Bar III LLC which includes Lemon Grove Dairy, 450 cows, Wauchula Dairy, 350 cows, and Zolfo Springs Dairy, 1,300 cows and about 1,000 acres.
Chris, Brittany and Holden own Nickerson Cattle Company. Joe and his wife Marlene, Courtney and Logan, own Nickerson Bar III. More importantly, it now allows each family to decide what works best for them.
Again, the Unified Credit was used to gift assets. In 2017, the allowable limit was $5,490,000 per parent per child without tax implications. Still, everyone involved says the legal and business part of the transaction was no picnic. “It was not easy; it was not fun,” says Courtney.
“Because it’s a huge undertaking, it took us a long time to go through everything,” adds Brittany. “We had to get the asset valuations done, do the accounting and just the deed work for all the land was extensive. It takes a lot and costs a lot. You have to be strategic about it.”
You also need highly competent, professional help guide you through the process. Those consultants don’t come cheap, but they are essential. Their attorney charged more than $500 per hour, but she also saved the Nickersons thousands and thousands of dollars with her tax advice.
The Nickersons had been working with both the attorney and their accountant for decades. So the advisors knew the Nickerson operation intimately and worked well together, Chris says. “You have to have someone who is looking out for all partners’ interests,” he says.
The other key to farm transition from one generation to the next is transparency. “We never had a secret meeting with the lawyers. The kids were always present, and everybody knew where we were all the time,” Chris says.
“It was all open to all of us, everything,” agrees Logan. “You have to be able to trust the people you are passing the farm down to. I commend my dad and uncle for trusting us to bring us into the business as early as they did.”
“I would give our grandfather most of the credit for starting where he did—transferring the ownership into his sons’ names,” Courtney says. “It has just been a Nickerson family tradition to get the next generation up to speed as quickly as possible.”
The milk price landscape over the past five years has not made the financial part of the dairy business easy. But the way the Nickersons gifted the assets to their children did not create an additional loan burden on the operations. They simply have to meet existing debt obligations that came with the transfer, and can now concentrate on managing the dairies to maintain cash flow for each of the separate enterprises.
“We still collaborate on a lot of things,” Brittany says. “Up until August, we had been with the same feed mill, nutritionist and nutrition program. We belong to the same co-op. Now we just manage two separate silos rather than one big one.”
The operations are very similar. “So we have the perfect benchmark to compare ourselves to” Courtney says. “I probably talk to Brittany more now than when we were together under Nickerson Brothers.”
Joe, kind of the quiet one of the bunch, sums it up best: “It was the best thing we ever did.”
SIDEBAR: Unified Credit Limit Sunsets in 2020
The current Unified Credit (UC) limit of $11,580,000 is scheduled to sunset at the end of 2020, possibly dropping back to $6 million on January 1, 2021.
Whether it does likely depends on who wins the election, both in Congress and the White House, says Paul Neiffer, the tax principal with CliftonLarsonAllen Accounting in Walla Walla, Wash.
The UC is the amount of assets that each person is allowed to gift to their heirs without incurring gift, estate or generation skipping transfer taxes. The credit can be applied while a person is alive or upon death.
Even if the UC drops, an estate exemption will continue, says Neiffer. The exemption amounts to about a third of the estate. “So if you have a $30 million estate, the exemption would drop it to $20 million and then you can apply the UC to that,” he says.