Despite farm groups working hard to advise farm owners of the
need to plan for their eventual succession, many farmers appear to
be reluctant to plan properly. Though there are many reasons,
studies show that the number one reason is that it is "too
early" to begin planning. But is it really too early, or is
there just an unwillingness to plan for succession? All farm owners
have to leave their operation at some point. If you are one, when
you do, you will want to make sure it is on your own terms. This
article focuses on family farm transfers. An outright sale to a
third party might avoid some of the issues described below, but
succession planning remains an important consideration in these
In my experience at Collins Barrow, I have found that the most
difficult issues when developing a succession plan are the
"soft issues." These are likely the issues that keep farm
owners from starting the planning process. Planning for succession
is a very emotional and, at times, uncomfortable process. Many
owners will say that the more important issues are the technical
ones, such as strategies for minimizing income taxes. These are
indeed important issues, but they are usually more easily resolved
if the soft issues are addressed first. It is the soft issues that
can derail even the most carefully considered plan.
Soft issues can include factors such as unresolved conflict
within the family, lack of trust among family members and other key
stakeholders, unrealistic expectations of some family members, fear
of losing control and fear of putting the family wealth at risk.
Farm owners face many difficult questions. Ask yourself: how do I
deal with unreasonable family expectations or the feelings of
entitlement that children may have with respect to my farm? How do
I deal with children who do not want to work in the farm business?
What will I do when I retire? Can I continue to play a role in the
farm business? One of the first steps I take when assisting clients
with succession planning is to interview each of the key
stakeholders (family members, key employees, etc.). I want to
identify areas of common interest that can be built on to help move
the plan forward and start establishing goals that will give the
plan focus. I also want to identify potential obstacles, which are
normally the softer issues. If the plan is to have any chance of
success, these issues must be addressed.
Soft issues normally arise from a lack of information, creating
uncertainty and confusion. Dialogue among the key stakeholders will
fill in the information gaps and remove uncertainty, reducing
potential conflict and allowing the participants to move beyond
these issues. Ignoring the soft issues does not make them go away.
Preparing the right succession plan requires a team approach,
ideally involving someone who has facilitation and mediation skills
and experience with farm succession planning. This person will
bring the soft issues to the surface in a constructive manner so
they may be resolved.
The team should also include a group of professionals (e.g.
lawyer, wealth management and investment advisor, consultant,
accountant, banker) who will work together to develop your
succession plan. In most cases, these will be advisors you
currently engage, who have knowledge of your business and personal
affairs. They bring the necessary skills to the table to create a
plan that is consistent with your goals. But it is important that
they work together. If they work in isolation, the plan is likely
to include recommendations that are inconsistent, leading to
frustration and possibly abandonment of the plan.
It is never too early to start planning for your succession. The
earlier you start, the easier it is to implement the strategies
required to achieve your goals. Succession planning and
implementation is a long-term process, not a one-time event.
Proper succession planning will help you:
maintain family harmony;
ensure the continued success of the
farm operation after you leave;
protect the livelihood of the people
that mean the most to you;
maximize the value you receive on the
sale of your farm;
minimize income taxes;
ensure you have the wealth you
require to live comfortably in retirement; and
meet your personal and farm business
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.
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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