Peter Boys, Boys Financial Services

Is it Time for Your Farm Sale or Succession Talk?

succession planning

At a seminar we held in Stettler recently, several farm families came to learn about the solutions we come up with to resolve some of the farm succession planning issues we run into from time to time.

First of all, my suggestion to farm or small business families is, don’t keep putting it off. One of the biggest difficulties we run into is when someone comes in to see us after they’ve scheduled their farm sale, leaving us with few options to help them. It’s even worse if the sale was forced on the family as the result of a family member becoming disabled or passing on!

It’s not easy to talk about something you’ve put your heart and soul into for 40 some years, but there’s a lot more to lose by not doing so! It’s not uncommon to come across situations where a son has been farming with mom and dad for years for peanuts, expecting to eventually take over the farm. He may have the responsibility of making farm decisions but hasn’t the authority to write the cheques, which is a recipe for disaster down the road. Add to this out of date wills, drafted when the kids were little, amounting to a ticking time bomb. If something were to happen to mom and dad, the son suddenly finds he is farming in partnership with siblings that don’t want to farm, they just want money for their share!

Children’s spouses who come into the family mix can have a major impact on your farm operation, positive and negative. There can be drastic repercussions in the event of future divorce or separation. And don’t assume that your new daughter-in-law will be happy to move into the little old house you’re leaving!

The age-old issue with family farms is, what’s in it for the non-farming siblings when one child ends up with the family farm. Fair is not usually equal, but there can be equitable solutions. A joint last-to-die life insurance policy is often the most suitable way to create the equitable solution. These are best bought while the parents are young and healthy rather than waiting and running the risk of expensive ratings or outright decline of coverage because of medical issues.

Ever increasing land values are adding to the challenges that farm families face with the sale or transition of the farming business. Tax issues are becoming more complex, and rules keep changing. Incorporation may work for some, but the pros and cons need to be examined. Today a farm family might have a trucking or oilfield service business tied into the farm, exposing both businesses to cross liability in the event of an accident or disaster.

This is where working with specialized farm financial, tax and legal advisors is important, to review things such as holding companies, land companies or other structures. Ideally it’s best to work with advisors who works with a team of farm planning professionals to insure there’s communication across the group during the whole planning process.

One thing to remember is, for 2nd or 3rd generation family farms that have taken years to build, it may take time to examine the full picture and make appropriate suggestions. Plus the seasonality of farm operations often gets in the way of regular meetings between family members and advisors. So if sale or transition is on your horizon, get started soon rather than later, as it’s too late to close the stable door after the horse has bolted!
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