Farm Succession - Do's and Don'ts
- Other Resources
Farm succession planning is a process that should be started sooner
Tough questions have to be asked. Is there a potential successor? If
yes, does he or she have the skills, abilities, knowledge and desire
to successfully operate a sophisticated farm business in todays
agricultural economy? If there is no successor, what are the options?
Is selling part or all of the farm assets an option? How long does the
current operator(s) want to continue running the business? Only the
individual(s) involved can answer these questions.
Here are some dos and donTs to help start the process.
Do think of succession planning as a process rather than an event.
It takes time and effort.
Do start planning now. The earlier planning begins, the greater
the number of options.
Do keep the big picture the long-term direction of the farm
business in mind. Maintaining a positive attitude can make
all the difference.
Do complete a financial analysis of the past and present farm business
along with some financial projections. Profitability is a key piece
of the puzzle the show stopper when it comes to
developing a succession plan. If the farm is not making money now,
what can be done to make it profitable? Is the farm business viable
in the long run?
Do become educated about the subject take workshops and
seminars, read articles, complete self-assessment questionnaires related
to succession; become an active participant in the planning process.
Do consider using a family business meeting as a way
to open the lines of communication among family members. An objective,
third-party facilitator can help ensure that the initial meetings
run smoothly and everyone has an opportunity to voice their interests
Do determine the most important things (values and their priorities)
to each individual family member as a starting point. The business
meeting mentioned above can be helpful with this.
Do figure out each individuals personal, family and business
goals, which should be based upon their values and priorities.
Do ensure good communication among family members about plans,
strategies and issues.
Do address the issue of fair (equitable) vs. equal division of
the farm early in the process especially if there are off-farm
family members involved.
Do prepare a legal will early. A will can provide guidance on how
the estate should be settled.
Do develop a successor development plan for any family
member(s) who is (are) planning to take over the business. This is
a plan to train and develop the successor(s), so he/she has the appropriate
skills and knowledge to successfully run the business.
Do generate and discuss various options be creative. These
can be narrowed down over time.
- Do assemble a team of professional advisors (e.g., a
lawyer, accountant, financial planner, banker, etc.) and work with them;
communicate with them and ensure they fully understand what is wanted.
Once there are some clear ideas of how the transfer might take place,
the team of advisors can assist in looking at the pros and cons of certain
ideas. The family members involved will decide upon the best plan and
strategies for their situation.
- Do take responsibility for development and implementation of the plan
with help from the advisors. But remember, this is the familys
plan, not the advisors. Family members have to buy into the plan
for it to be successful.
- Do consider the tax implications, but dont focus solely on them
as the most important thing. For example, rather than saying, We
don't want to pay any taxes, make your goal, Transfer the
farm business efficiently and effectively while considering the tax
consequences and preserving as much family capital as possible.
- Do write it down. By writing it down, all family members see exactly
how the plan will unfold, which can help avoid future misunderstandings.
The advisors can help document and fine-tune the plan. Basically, the
plan is the record of the decisions you make about how the transfer
of labour, management and ownership will be handled. It describes how
best to achieve what family members want to have happen to the farm
business. It must be internally consistent and address the goals and
plans for the family members and for the business.
Dont procrastinate start talking and planning for
Dont be afraid to ask questions and listen carefully to the
answers, even though you might not like them.
Dont assume you know what others are thinking or how they
feel about the process or what they want to achieve from the succession
plan. Listen carefully and ask questions if you dont understand.
Dont be afraid to share responsibilities. Both generations
will need to work together to ensure the optimum transfer of labour,
management and ownership. The successor development plan
mentioned above can help.
Dont define life as the business. There is more to life than
work family, friends, leisure enjoyment, sports, hobbies, etc.
Dont put all your eggs in one basket. Plan ahead, think early
about retirement, save and invest off-farm, so you will have some
options in the future.
Dont rely on just one professional advisor it is a
good idea to use a team approach.
Other OMAFRA publications on succession planning:
Publication 70, Farm Succession Planning Guide
A more detailed discussion, with informative technical resources,
designed to give the farm family and farm business advisors the
tools to develop a workable succession plan.
Farm Business Partnerships, Order No. 11-019
Farm Business Joint Ventures, Order No. 02-069
- Farm Corporations, Order No. 01-057
- Taxation on the Transfer of Farm Business Assets to Family Members,
Order No. 09-015
This publication is intended as general information and not as specific
advice concerning individual situations. Although it outlines some of
the considerations around farm succession planning, it should not be considered
as either an interpretation or complete coverage of the various issues
and/or laws affecting farm succession planning. The Government of Ontario
assumes no responsibility towards persons using it as such.
For more information:
Toll Free: 1-877-424-1300