Your Money: Transferring the family farm: Family dynamics
By Medicine Hat News on October 27, 2018.
(Part 1) When it comes to the structure of farming businesses, a prominent trend identified in the report was the increasing use of farming corporations. Since 1971, farm operators have been moving away from sole proprietorships and partnerships towards farming corporations, which can offer certain business and legal advantages. Many of these agricultural operations are still operated by families, with nearly 23 per cent reporting their operations as family corporations in 2016. A key finding calls attention to using a written succession plan to transfer the ownership of an agricultural operation. It points out that in 2016, about eight per cent of all farm operators had a written succession plan, and about 16 per cent of family and non-family corporations had a written succession plan, as compared with only six per cent of sole proprietorships and partnerships. A succession plan involves the transition of a farming business by the principal farm operator to the next generation. Alternatively, it may involve selling the business, or renting out farmland to a third party, while allowing the farm owner and his or her family members to enjoy the financial benefits arising from the sale or rental. As with any family business succession plan, the earlier the planning begins, the better prepared the next generation may be to take over and continue the successful operation of the business. During the planning process, transition elements such as ownership, capital, management and labour will need to be discussed by the family as these elements can be closely tied to individual identities and roles within the family. Engaging in a constructive family discussion can often avoid family disputes and disharmony. A farm succession plan should be distinguished from an estate plan. While a succession plan provides a roadmap for a transfer of business ownership to a successor, an estate plan provides for the distribution of accumulated wealth from an estate upon the death of a business owner. The latter will typically be given consideration within the succession planning process. A typical succession plan involves the following steps: Start the conversation, then gather and review financial information, next discuss options and make initial decisions, followed by developing the plan and finally then execute the plan and monitor its progress. Family farm succession involves a complex matrix of issues and takes time to execute. It is important to start as early as possible. When embarking on the planning process, consider engaging a team of professional advisors to assist in developing and implementing various aspects of the plan. This may include a certified financial planner (CFP), business valuator, tax advisor, banker, insurance specialist and legal counsel. For a further discussion around your investment and estate planning issues, contact Neil Mardian, M.Sc. (Mgmt) CFP at 403-504-3026 or neil.mardian@td.com 10-9
