“Fair is not equal” | Agreement needed for on-farm and off-farm children
WINNIPEG — Five University of Manitoba agriculture diploma students who attended the Manitoba Young Farmers Forum Jan. 29 were asked what they hoped to do in agriculture.
“I’d like to continue farming and keep it in the family,” said Darren Bestland.
Jordan Friesen had the same idea.
“That’s what Dad did, that’s what Grandpa did,” said Friesen.
“It’s bred in the family and we’re going to keep it going.”
Ditto for Mike Wiebe.
“The farm has been in the family for a number of years and I just want to keep it going.”
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Everyone in the group planned to continue with the family farm, but over the next few hours they heard that this will be no simple, automatic or achievable process.
Many family farms disappear, and not just because farming is a challenging business.
Adviser Cedric MacLeod told the young farmers — as well as a group of older farmers attending the Keystone Agricultural Producers annual meeting the next day — that failing to work out how to give young farmers equity in their family farms is a disaster waiting to happen.
Young farmers need to force their fathers to deal with succession planning, and aging fathers need to bite the bullet and make formal plans so that everyone else on the farm knows what’s planned for them.
And it isn’t good enough to have a few casual conversations about the future.
“If it is not written down, it didn’t happen,” said MacLeod, who operates MacLeod Agronomics in Fredericton, N.B.
He said he knows of cases where a young farmer thought he had a certain understanding with his father, but then the father changed his mind, made other commitments or didn’t work everything out, leaving the young farmer in trouble and feeling betrayed.
It can lead to families tearing themselves apart after a father dies or retires and on-farm and off-farm siblings discover they are all expecting a bigger share of the farm than they are likely to receive.
The off-farm family members expect their fair share, but the ones who have stayed on the farm and put sweat equity into the operation expect to be able to continue farming.
Farm succession can easily become impossible if the father hasn’t carefully written down how the assets are to be divided.
“Fair is not equal,” MacLeod said about the complexities of allowing on-farm children to earn an equity stake in the operation while preventing off-farm children from feeling cheated.
“Having a plan for how everybody gets their inheritance is part of that long-term wealth management plan.”
MacLeod told young farmers that they also need to encourage their fathers to take money out of the farm operation as profits every year rather than reinvesting everything in the farm.
That practice may help the father avoid paying taxes while he is still actively farming, but the children who take over the farm can face massive tax bills that they will have to borrow money to cover.
Adding those interest costs to the other costs of farming can break a young farmer.
MacLeod urged young farmers to find a way to get their fathers to deal with these issues.
At the KAP conference, he urged delegates to take the lead in showing other farmers that succession issues need to be dealt with before retirement or death.
Too many young farmers face an impenetrable wall when trying to determine their father’s plans for the farm, which can prompt them to walk away from the farm.
“Don’t be the brick wall,” said Mac-Leod.
“Have a courageous conversation.”
