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CBC
Commentary:
How Big a Deal is Succession Planning
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 Everyone agrees that it’s important
to make the basic arrangements for passing on the farm
to the next generation. But many farm families don’t
treat succession planning as that big a deal —
after all, farmers have been handing down their farms
to their kids since agriculture began.
But times have changed a lot. There probably
isn’t any other business today where so much capital
is invested per meal ticket.
A carpenter may have to buy a van full
of tools and a trucker, a rig worth $150,000. But on
the average farm in Ontario today, one income is going
to require capitalization of anywhere from $500,000
to $2 million.
And when you go into a farm partnership
with a family member, it’s not for a season or
two. You’re going to look at a 25-year plan.
This is true even if only one of the
children is going to be actively farming. Farms are
so highly capitalized that very few parents will have
enough assets outside the farm business to give their
other children even a semblance of an inheritance. In
other words, even if only one child farms, his or her
siblings are almost certainly going to end up as partners.
Setting up that partnership so that everyone
is happy isn’t easy. Creating a partnership that
will endure is even harder.
For example, say you have two brothers
who undertake a major expansion and it works out great.
A few years later, one brother is all set to expand
again, but his sibling shocks him by saying that he
wants out. It turns out the other brother nearly got
an ulcer worrying about the first expansion and it put
his marriage under a lot of stress. The second expansion
is a great idea, he says, but there’s no way he’s
going through that again.
Or maybe the farm’s not going well
and the off-farm sibling is so concerned about his brother’s
well being that he starts pushing to sell the farm.
Then there’s all the disagreements that start over
whether to buy a new tractor, or add a new crop to the
rotation, or who gets to build a new home and who stays
in the old place.
That’s why I believe that succession
planning should begin when the kids reach school age.
As parents, you have to teach your children how to get
along and how to keep getting along when something changes.
Because changes will come, and keep on coming.
The way they farm will certainly change
greatly over the coming decades. The financial situation
will probably go full circle a couple of times. And
your children will change their views, their priorities,
and the way they relate to each other won’t stay
the same forever.
There are three elements in succession
planning and these are what they are:
The first one is communication, the
second one is communication, and the third one is also
communication.
So start the conversation as soon as
you can by asking the most fundamental questions. Why
do you want to farm? What do you expect to get out of
it? What are you prepared to put in?
And teach them to keep asking those questions
of themselves and their family partners because, as
the years go on, the answers will keep changing.
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