Farmers want the farm to survive them, but there’s no succession plan

Most farmers expect to hand over the operation to a family member, but few appear to be doing anything to ensure it happens.

At least 120,000 farms are expected to be transferred in the next decade, but without a succession there’s a much greater risk of family conflict and even losing the farm’s successor altogether, said farm family coach and author Elaine Froese.

“I call it the tsunami of agriculture,” said Froese. “It’s this big, giant, silent wave that’s going to hit people but they don’t even know they’re going to get hit and there’s no warning signs being flashed.”

Ipsos Reid polled 455 farmers for the 2015 Canadian Agricultural Outlook Survey and only 30 per cent reported doing any formal succession planning. Yet the majority (62 per cent) said they expect to transfer the farm, with one-third expecting that to occur within the next few years. (The poll, commissioned by Glacier FarmMedia, surveyed a wide range of Prairie farm operations, with two-thirds having sales of $250,000 or more.)

Why the disconnect?

It’s not that farmers are too busy, said Froese.

Farmers are avoiding the subject because of a fear of conflict, and because the value of many farm’s assets has become so enormous.

“People are just paralyzed, so they do nothing,” she said.

Agriculture isn’t much different than non-agricultural businesses when it comes to succession planning, said Gwen Paddock, national director of RBC Agriculture, which helped develop the survey. What’s different is that producers who don’t plan are putting the farm’s legacy — and maybe even the family home — at risk.

“At the personal level, we know how important it is for our clients who’ve worked hard to have that legacy,” she said.

Major downsides

The financial implications can also be serious, Paddock added.

For example, if the hoped-for transfer fails and the farm is sold to an outsider, there could a be higher tax bill. It differs by province, but in some instances land transfer tax is not payable when transferring an active farm operation to a sibling or within the family, she said.

“When you think about the value of some of these farm operations, that can represent a substantial amount of money,” said Paddock. “That money — rather than going to pay tax — could be left in the operation to support the cash flow and perhaps fund future growth.”

Good advance planning can also help minimize, or at least help a family prepare for, the impact of capital gains taxes. It’s advisable to start planning at least five years in advance of when you want to step down, said Paddock.

“If you start your planning soon enough and leave yourself enough time, then you can take advantage of those options,” she said.

At the same time, it’s critically important that farm families get good advice from qualified farm advisers, an accountant who understands the business of agriculture, and a lawyer.

However, no farmer will begin assembling that advisory team unless he or she is preparing to start the planning process — and it’s that unwillingness to do so that’s stalling this, said Froese.

But those who are willing to take that step will find there’s a lot of help, she added.

“There’s no end of resources for farm families to do farm succession planning,” she said.

“What’s needed is the willingness to start talking and have facilitated meetings to take action. Nobody can drive the process except the farm family. You need a driver within the family who says, ‘We are getting this done.’”

The 2015 Ag Outlook Survey was conducted in December and 55 per cent of those polled were between the ages of 55 to 74. Two-thirds were grain and oilseeds producers, and 81 per cent of respondents were from Alberta, Saskatchewan, and Manitoba. Their farms had sales ranging from $10,000 to over $2 million.