Procastination, preparation and planning: that was the title of the afternoon seminar on succession planning I just attended.
The event, hosted by Manitoba Canola Growers, was well attended, but then there usually is pretty good attendance at an event focused on succession.
There are lots of things that farm families have to think about and work through when transitioning the ownership and management of the family farm business to the next generation.
As I listened to the presentations and discussions, I reflected on a few things that have come up in meetings I’ve had this winter with families who are working on their transition.
When I ask farm families if they have a will, most say they do. Having said that, I came across a farm family recently where there was no will, which wasn’t a good situation at all.
If you don’t have a will, stop right here and call to make an appointment with a lawyer. Right away. Do not wait.
There will be reasons why you don’t have a will, but don’t dwell on them. If you are uncertain about what you want your will to say, a lawyer will help. Wills can be changed if circumstances or your thinking changes.
Which leads me to the next question I ask farm families: does their will accurately reflect what they would like to see happen to their estate? Far too often the answer is no. This is better than having no will, but it too is not a good situation.
If this is your situation, you need to deal with it. I’ve heard lawyers say that your will should be re-viewed every two years. This may not be frequent enough if there are lots of changes going on within the farm and family.
Succession planning is moving away from something that only happens when the senior generation reaches the magic age of 60 or 65 and is becoming a mainstream management practice.
An increasing number of farm families fall into the younger demographic of 30s and early 40s and are actively thinking about their own succession. For some of them, this is 20 years or more down the road.
As they make investment and management decisions today, they think ahead about how these decisions may benefit the farm and family when the next transition is occurring.
Some of them are motivated to be more proactive about their succession because of a less-than-desirable experience they had with their parents.
Others simply believe that farms and farm families will continue to become more complex. There will be more change. There will be greater wealth to contend with.
All factors that contribute to succession planning are being integrated into regular and ongoing management.
I’ve come across situations where the “retiring women” in farm families, as part of the succession plan, want money in an account that they can access.
What I hear actually is a range of $50,000 to $250,000. It could be more or it could be less. It’s just a sum of money, deposited in an account that has unrestricted access.
These are the women whose sons and daughters are going to become the farm owners and managers, but it really doesn’t have anything to do with who is going to “run” the farm. They are fully confident in the ability of their children.
These are women who own parts of farm businesses that are worth millions of dollars. The farms have been very successful, and the women don’t question their equity or worth.
However, the “worth” is tied up in assets and shares that are often not that liquid — and that’s partly the reason.
The women generally don’t want the money in a deposit to buy things. They know that if they want to purchase something, they likely can.
They usually would like some cash on deposit because they want to know they have access to cash in the event of a crisis or an emergency, without having to jump through hoops and bureaucracy to get it.
Think of it as “comfort” money; think of it as independence. If something were to happen to their husband, they would not have to go asking for money.
Another reason, although I think not as common, is for the cash on deposit to be a form of recognition for the contribution they have made to the farm and their family.
Many made significant sacrifices along the way. The deposit is a way of acknowledging their commitment.
Terry Betker is a farm management consultant based in Winnipeg. He can be reached at 204-782-8200 or email@example.com.