Start succession planning slowly, but early

Parents wanting to pass on the family farm need to find out what their

children’s expectations are, including those no longer involved with

the farming operation.

But during those discussions, the parents must remember their own

expectations and needs. Once the farm is transferred, will they have

enough money to comfortably retire?

“You have to consider what you have to give,” said Jill Falloon,

Manitoba Agriculture family living specialist. “You’ll want to retire

and you’ll want something to retire on.”

That was part of the advice given during a session on farm succession

planning, held as part of the Manitoba Farm Women’s Conference in

Brandon last week.

The three panelists were bombarded with questions, a reflection that

many farmers in Manitoba are at or near retirement age and there will

be billions of dollars worth of farm assets transferred in the province

within this decade.

The panelists were Pat Fraser, a lawyer with Meighen, Haddad and Co.,

Julee Galvin, an accountant with Meyers Norris Penny who farms with her

husband near Virden, Man., and Falloon, who works in the home economist

section of Manitoba Agriculture.

Two of the most difficult questions asked of the panelists were how to

get the discussions started and how to prevent those discussions from

becoming a wedge that splits families apart.

“It has to be done tactfully, it has to be done carefully,” said

Falloon. “You don’t want to feel like you’re pushing your parents by

any means, but it certainly needs to be attended to.”

Panelists suggested that all members of the family be involved in the

discussions, not just the parents and children remaining on the farm. A

family meeting was suggested as one avenue. Another option would be to

approach each child separately before bringing them all to the table

for a family meeting.

In the case of conflict, an objective person trusted by the family

could be consulted to help break the impasse, such as the local

minister or agricultural representative.

Ultimately, the goal would be to keep the lines of communication open.

“You want to keep your family intact too, not just the farm,” said

Falloon.

While it may seem easier to avoid those discussions, the panelists

cautioned against that. Without careful succession planning, there’s a

greater risk that the assets left by the parents will be heavily taxed

and that rifts among their children will emerge.

“If you do not plan for a successful farm transition, it causes many,

many problems,” said Galvin.

Parents were advised to start planning for a successful farm transition

years before they intend to retire. Then the plan can be adjusted to

take into account changes that happen as the parents draw closer to

retirement.

There are many ways to get the discussions started. People wanting

advice on that can approach a home economist, a farm management

specialist or an ag rep with Manitoba Agriculture, suggested Falloon.

Another option would be to attend a seminar on farm succession planning.

Falloon said it’s wise to have a general idea of what the farm

succession plan will look like before taking it to accountants and

lawyers.

The intent of the plan needs to come from within the family. At some

point, however, lawyers and accountants should be consulted to ensure

the plan is properly spelled out in documents. That will diminish the

risk of the parents’ wishes being contested in court after they are

deceased.

“You really can’t do this at home,” said Fraser. “There’s too much

documentation involved.”

“The rules are very complex,” added Galvin. “They’re not very

forgiving, and if you’re offside, you’re offside.”

Galvin also emphasized that land, money and machinery are not the only

farm assets that get passed from one generation to another. Management

skills also have to be a part of that transfer. The transfer of

management skills should be under way well before the parents’ intended

time of retirement.

“Dads can have a really hard time letting go,” Galvin said, noting that

one result can be children who feel they are nothing more than hired

workers. Another result is that when the children do take over the

farm, they may be ill equipped to manage it.

When it comes to transferring the farm, parents need to take a serious

look at whether any of their children have the skills to carry on with

the operation. Sometimes, the parents might be wiser to sell the farm.

When the intent is to pass the farm to a child or children, parents

need to realize that fair is not always the same thing as equitable,

said the panelists.

For example, if they try to ensure each child will receive the same

value of assets when they pass away, that may mean selling off part of

the land to satisfy the non-farming siblings. However, that might

jeopardize the viability of the farm. An alternative would be to look

at other assets that could be passed to the non-farming children.

“Sometimes you can break down the whole structure of the farm with just

a few quarters of land,” Galvin said.

“That causes a lot of problems.”

Despite the challenges, the panelists said farm succession plans

generally go well if they are properly planned and documented.

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