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 Over 50?Farm succession is a serious issue, but when push comes to shove, only about 18% of the farm families in a 1999 Ontario study had an up-to-date legal will. Only 2% had a fully developed succession plan. Are we that badly in denial? The joint study by the University of Guelph and OMAFRA asked advisors to identify the issues that often created problems. Family issues topped the list of barriers. “The advisors suggested that farmers should start early and determine a few different equitable options. Once the process was started, and options identified, then the farm family considers tax implications. Advisors noted that in most instances, farm families did the opposite, they focused on options and solutions to minimize tax liabilities and ignored the family issues.” “What is the farmer going to do with himself?” is a question that is “outside of Joe’s comfort zone, so he just doesn’t go there”, says financial planner Duane Davison. In your 50s you really need to name your fear and deal with the urgent issues of what retirement and farm transfer look like to you (fears list by Scott vanEngen). Do you fear:
Family conflict is to “be avoided at all costs” ... thinking that conflict avoidance is a virtue is like being diagnosed with high blood pressure and refusing to treat it. Everything is going to explode. The estate doctor prescribes frank, honest family discussions of everyone’s expectations. Your adult son is now home from ag college, he’s educated with lots of other career options. A 2-year “testing period” with wages or profit sharing will show you if you really can work together. Are your children demonstrating a realistic interest in the farm? “That woman” your son dates could be your future daughter-inlaw, so choose your words carefully. Communication is a key skill at every age. For some great encouragement go to www.farmsuccession.com and click resources by topic, such as Communication and Succession planning: growing the farm business together. What are your control issues at 50? Who is responsible for the management, production and marketing decisions? Are you less tolerant to risk as you age, or can you see reorganizing the business with a good father-son agreement? Decisions in the next 10- year time horizon are critical; as time flies by you may have fewer options. In the Ontario study the older generation “just couldn’t let go”. I’ve even heard of a couple who “snuck away to a farm transfer meeting under false pretenses” because they could not admit to their children what they were thinking. Ugh! Fear of not having enough to live on in retirement or loss of wealth is real. Unfortunately, having all your retirement fund come from only farm assets threatens the viability of the farm. When you get real numbers in place you’ll see that the farm may not be able to generate enough cashflow to feed 2 families and ensure a comfortable retirement for parents. When you set a figure and do lifestyle planning for your retirement, you need to track family living expenses for a few years to avoid surprises and shortfalls. Now is the time to benchmark how much money you’ll need from the operation and look at where it will come from. At 50, you still have some flexibility to maximize your off-farm investments. You can also check out different business structures like family trusts and freezing the estate. You need to seek out the costs and benefits of insurance as a tool for cash for the next generation, or as a payout to nonfarming children. Alberta Agriculture has a simple 6-step succession plan:
Feeling frisky at 50? Good! You have a lot of work ahead of you. Face your fears, and get out of your comfort zone. It’s time to make some hard decisions if you want a happy family as your legacy. Elaine Froese encourages farm families with her speaking and writing business, based on her farm near Boissevain, Man. Contact her toll-free at 1-866-534-6846 or by e-mail at elaine@elainefroese.com Note: You are welcome to reprint or repost any articles on this website with the understanding that
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