Transitioning the family farm — that is, passing it to another owner when you are ready to retire or move on — is easy. You can do absolutely nothing and I guarantee the farm will still transition. The trouble is it might not end up in the hands of those you intend and you might destroy family harmony as a result. You might also not enjoy the retirement you are hoping for.
The alternative to all of this is to start the planning process early so you can create a fair, equitable and workable plan that meets the needs of all involved and generates consensus about the way forward.
Starting the process early still doesn't make it easy, and the result may still be family disharmony. But even though you can't necessarily control the outcome, you can do a few things to positively influence the transition process.
The importance of relationship capital
One of the most important factors in successful transitions (where "success" is defined as consensus on the way forward) is the family members' relationships with each other. This "relationship capital" includes trust, loyalty, positive attributions, benefit of doubt, goodwill, grace, forgiveness, commitment and stewardship. One of our greatest challenges as professional advisors is when we are tasked with creating a transition plan for families who don't have this relationship capital.
So what can be done about this? Well, building relationship capital begins with communication and with the family developing its values, vision and mission early on. These things don't need to be formal statements to begin with, but they should be intrinsically understood by all family members. Families should also manage expectations and create some rules about inclusion in the farming business.
To make the transition process easier, you need to start the planning process at a very early stage and focus on the family, on managing expectations and on communication, particularly in terms of storytelling and conversations that establish values and create long-lasting bonds.
If it's too late to get that early start, then make it a priority now. It is always possible for families to change their behaviours in a way that will lead to successful outcomes. By creating a statement, a set of protocols or even a full constitution, families can improve their relationship capital and create the right atmosphere for a smooth transition.
In the end, engaging in the process of transition planning and recognizing that the process is as important as the outcome will help families see the value and take the first steps.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
