Peter Boys, Boys Financial Services

Succession Planning of the Farm

Succession

Succession planning is not always the first priority for today’s aging generation of farmers in the developed world, as they seem to have a general reluctance to transfer ownership and management to the successor generation. This phenomenon is documented by studies done around the globe, causing significant concern to governments, bankers and agri-businesses.

Today’s rapid farm expansion, along with input and commodity price volatility has bankers taking an active interest in whether or not farm families have a documented succession plan in place. This impacts banker’s willingness to extend ongoing credit to farm enterprises. More than ever, the success of family farms is just as important for those families as it is to the financial services sector.

Farmers planning to transfer their farms to the next generation over the next 20 years are part of the baby boom generation who started farming between 1965 and 1985. This group has been instrumental in dictating how society evolved over the past 55 years, from baby food to the education system. They also had a major impact on real estate and land values when they started buying homes, farmland and setting up businesses.

Succession planning has evolved to include what’s now referred to as “human dynamics”, which refers to the interactions that take place within the farm family as they live and work together. In some circles this subject was referred to as the “touchy, feely stuff” that commonly was avoided in the past. Society is now more open to discussions about how people feel and respond to events. This appears to be making it easier for parents to talk openly with their children and is encouraging families to become better communicators.

In dealing with many farm families over my 44 years here in Canada, both in the farm equipment business and the last 16 years as a financial advisor, the number one issue I have seen is lack of communication. This leads to participants assuming what’s going to happen, with no clear understanding of what will happen when the current ownership either retires, sells out or is forced off the farm due to disability or ill health. When I see the next generation working with parents, with no understanding or documentation as to what they or their non-farming siblings can expect to inherit, I view this as slavery being alive and well on the prairies.

Add to this that a very significant number of farm families who either don’t have wills or have wills that are years out of date. These issues, if not resolved, are ticking time bombs that can end up ripping families apart. The “human dynamics”, is nearly always the stumbling block that farm families need to resolve, as the technical planning part of the process is relatively easy to develop once everyone is on side and in agreement.

Please don’t put off your sale or succession plan until forced to by divorce, disability or premature death. There are plenty of resources available to farm families, including experienced financial planners who can act as a quarterback in the process. Elaine Froese was in Stettler at the end of October presenting on farm succession planning. Visit her website to access more resources on this subject.

You’ve spent a good part of your lifetime building your family farm, so it’s not unreasonable to take the time needed to develop a sale or transition plan for your family. But you need to get started early.

Image licensed through Shutterstock

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