DETERMINING EXPECTATIONS FIRST STEP IN FARM SUCCESSION

Originally published on January 9, 2003

 

Passing the farm to the next generation is six parts emotion, three parts communication, one-half part process and one-half part technical support.  It is not an event, one person's problem or something to be left solely in the hands of a lawyer or accountant. 

It is natural for the farmer who is leaving to experience a sense of loss. He chose farming, met the challenges head-on and achieved success by doing things his way.  A farm succession plan implies change and with it a perceived end to the way things once were done.  The farmer who is letting go will be concerned about the capabilities of his successor and his new role in the farm once the succeeding generation takes over. 

For the succeeding farmer, these are big shoes to fill.  The stewardship responsibility of preserving the farm carries with it all of the contributions and sacrifices of parents and grandparents.  There may be feelings of self-doubt and isolation in the effort to wear the big shoes.

The succeeding farmer may feel obligated to prove himself to the task and make decisions without the guidance of the retiring generation.  If the succession plan is not yet known, then the farming child may be thinking that he will have to buy the farm twice first with sweat equity and then with cash.

For the non-farming children, there may be emotions of envy.

"Here we are, busting our behinds for a better tomorrow while Johnnie gets the farm and with it a secure future."

I have also seen grandchildren thrown into the succession debate.

"Why shouldn't our children secure the same benefits as Johnnie's kids?"

 

 

In the midst of this emotion, the retiring farm generation must build consensus.  Communication is the glue that will bind the family together throughout the planning process.  Here are a few sample discussion points that we have used to build a farm succession consensus:

Mom and Dad have built the farm and they have the exclusive right to sell the farm guilt-free to open wider opportunities for family members and facilitate their own retirement.

How important is it for your farming child to receive the farm debt-free? What is the profit that your farming child will make from the farm in relation to the value of the labour that he contributes?

What are the non-farming children's standard of living and prospects? If they lost their job through an economic downturn, should they expect that the farm will be there as a safety net for their families?

What does the farm mean to each family member on an emotional and financial level?

Addressing what each stakeholder expects out of the family farm is the first step in implementing a farm succession plan that will work specifically for you and your farm business.  You will be surprised at the amount of energy required to complete this first task.  However, once finished, you will be ready to go to the next step of examining options that will best achieve your objectives. I will be discussing that step in my next column.

* Some of the information in this article came from the Agriculture Canada publication Managing the Multi-Generational Family Farm.

Allyn Tastad, certified general accountant, is a partner in the accounting firm of Hounjet Tastad Harpham in Saskatoon at 306-653-5100, e-mail at allyn@hth-accountants.ca or website www.hth-accountants.ca. He is also involved in the family farm near Loreburn, Saskatchewan.