Most farmers don’t enjoy thinking about selling the family farm, the dream they’ve worked so hard to build. It’s more than just a business – your farm is your home, your heritage. So, it’s natural to push succession planning to the back of your mind, putting it off until you’re ready to retire – or in the unfortunate case when declining health dictates.
By then succession planning is too late, the kids have long since moved on finding careers and starting families of their own – and often in the city. Without a proper succession plan, any big change (such as retirement or failing health) can send your family scrambling to find some way to balance their own jobs, the future of the family farm, and the competing needs of any other family members.
By not prioritizing succession planning, you risk setting your farm up for failure, or at least a less effective, bumpier change of hands.
Proactive succession planning is a recipe for future success
However, by being proactive and taking the time to plan for succession, as well as auditing that plan regularly, you’re setting yourself and your loved ones up for:
Lower taxes during succession
Stronger family ties
Success for following generations
To help guide you through the process, we’ll first look at what farm succession planning is and how it can help you and your family, then outline the steps on how to create the most effective farm succession plan for you.
What is succession planning?
Eventually, the family farm is going to get passed on. When that time comes, complications inevitably come up. Sometimes those complications cost money, and sometimes they even cost relationships.
Succession planning is simply the act of creating a process to help ensure the ‘changing of hands’ goes as smoothly as possible. This keeps both the financial and relational costs to a minimum.
The very first step for farm succession planning is to take a closer look at the details of your will, finding out any health care directives, and determining who your power of attorney is. But this is just the start.
Good, comprehensive planning that helps to head-off costly complications includes:
The future of both farming and non-farming kids
The transfer of property (including during your lifetime)
Trusts, insurance, and family law
Maintaining successful business relations and processes
To get all those benefits for a smooth transition, you need to walk through the whole process of succession with professionals who have been there before and can see possible bumps in the road.
For effective succession planning, you need a team that includes your:
In short, succession planning is your way of ensuring the success of both your farm and your family by proactively dealing with problems.
Why you need a good estate plan now
Only about 30% of farms are successful to the second generation of farmers. Go beyond that to the third or fourth, and those numbers quickly dive into the single digits.
The problem for many farmers is their own work ethic. Many have spent their whole life working the land, which means they’re often hesitant to move on. That means they’re not thinking about it and they’re not actually making the move until later in their lives.
The average age of a Manatoban farmer today is just over 53 years old (nation-wide the number climbs to 55), but there are more over 70 than under 35. That means the old plan of giving the family farm over to the next generation just isn’t viable.
By the time a farmer is 70 years old, their children are well into their careers, and their grandchildren are probably already in, or getting ready to enter university. So if health problems chase a farmer out of their livelihood, their kids are often not prepared to take on another whole career, unless they’re already farmers themselves.
By being proactive with your succession planning, you’re able to give your entire family time to plan and make the changes that need to happen so the transition will go smoothly – even if it is an emergency transition.
The major benefits of a comprehensive farm succession plan
There are a variety of ways to minimize taxes, like the Capital Gains Tax, if you plan your exit from the farm ahead of time.
It’s always important to remember that a farm is more than just a business. It includes things like the family home, livestock, equipment (some with sentimental value) and more. By sifting through these details with your family ahead of time, everyone can be prepared.
Passing on the keys to success
After decades in the farming business, you’ve built up a wealth of knowledge and connections that have helped you succeed. This information and experience is vital to the continued success of the farm. With a good succession plan, you can ensure it gets passed on along with the land, and everything that comes with it.
When your plan for exiting the farm is simply a question mark, it can create a veritable field of anxiety. From your own worries about the future of your farm, to managing the kid’s worries about what will happen in the case of an emergency, ‘the unknown’ can cause unyielding stress that’s a constant drain on your energy and a source of tension at family get-togethers. By opening the conversation early, and clearly outlining your intentions, you can plan for the eventualities and help alleviate extra anxiety.
Bayview’s succession planning process
When you work with Bayview Financial, we guide you through a proactive four-step process. This carefully-crafted plan will help you see potential problems and help you maximize the effectiveness of your farm’s succession plan.
Bayview’s 4-step succession planning process
Identify objectives – The first step is deciding what you want. Knowing where you are, and where you’re going allows us to map a smoother route between.
Uncover potential problems – The next step is to look ahead for any pitfalls threatening your way. With our team’s combined experience, we can spot most problems long before they come up.
Review solutions – After exploring possible problems, we work to create a variety of solutions, reviewing each to find the one that will be most effective for you.
Take action – Now that you have a personalized plan, the next step is to get out there and start putting it into action.
-> It’s important to continually update your succession plan. By revisiting it regularly, you can ensure it still meets your current needs, and the needs of your family.
A succession plan custom-fit for your farm
The most important part of any farm succession plan is making sure it’s right for you and your family’s needs. That means there is no one size fits all.
Some farmers we work with are most concerned about how their business will fare, and so opening an exit strategy so they can move on with their lives is the focus. For others, their primary concern is to maintain the stability and happiness of their family. With each of these objectives come different, custom-fit plans, and we’re dedicated to helping find that perfect fit for every farmer we work with.
By choosing to work with us early, we can help you protect your family, your future and your farm.
Contact us today to start working on your succession plan.