Farm Succession (Transition) Planning

Since the average age of farmers is now about 54 years (according to the last federal census) succession or transition planning has become a major concern for many people in the agriculture industry.

Here are some of the basics of succession planning:

  • The farm assets are the property of the parents and they can do with them whatever they wish. However, to maintain peace and harmony in the family among the on and off-farm children some discussions and negotiations should occur so hopefully an amicable division of assets will occur.
  • An important point to remember in the above discussions is that the split of assets among the on and off-farm children will not be equal. A slogan that is often used by succession planners is that “fair does not mean equal.”  
  • A good place to start farm succession planning is to list all the farm assets at current fair market value and liabilities so all concerned know what the real value of the farm is.
  • Along with the above the profitability of the farm should be examined. Many farms are “asset rich but cash (income) poor.”
  • Based on the above, the question arises, “can the farm support two or more family incomes (ie. the founders and successors) and how will the off-farm children be accommodated in the overall plan?”
  • If the present farm can’t support two family incomes is there a possibility to earn more revenue by diversifying, expanding, adding another enterprise (eg. a welding shop or trucking business). Another source of income could be from off-farm employment.
  • Is the older generation ready to give up control of the farm (over a period of time) and is the younger generation ready willing and able to assume operation and control of the farm (again over a period of time). If the latter is in doubt maybe the successor(s) should obtain more education before they will be seriously considered.
  • Will the retirement income for the senior generation be secure? What happens if the junior generation encounters financial difficulty and farm assets have to be sold (often at fire-sale prices).

All the above and many more will be addressed by Art in his succession planning sessions. His role is to bring the family together for discussions, do the financial analysis and write the succession plan. He will include accountants and lawyers at the appropriate times so the final plan is appropriate for all family members and is sound financially, legally and tax-wise. The planning guides that Art uses are:

  • Ontario Ministry of Agriculture, Food and Rural Affairs fact sheets no 10-023 and 10-025 entitled:
    • Components of a Farm Succession Plan
    • Farm Succession Planning Steps and Checklist.
  • Another good resource is a little book (180 pages) called The Family Business Doctor by John Fast Ph.D
  • All the above can be requested via the contact box on the last page of this website.