No matter what age, it’s never too early or late to put together a long-term plan for your farm, says a provincial financial specialist.
“Farmers are always busy with their daily and seasonal tasks,” says Rick Dehod. “When asked what their plan is for the next 10 years, they often say they haven’t had a chance to work on it yet.
“Whether the next generation is ready to take over, or you are in the prime of your farming career, you need to ask yourself what the farm business will look like 10 years from now.”
In 2016, a new module was added to the Census of Agriculture regarding written succession plans. The results indicated only 8.4 per cent of all operations have a written succession plan. Even for family corporations and non-family corporations, the figure was only 16.3 per cent.
“If you are 55 now, your life expectancy is possibly another 25 years,” said Dehod. “How long will you farm? How long will you physically and mentally be able to? If your desire is for the farm to continue, who is the successor, are you grooming them to be the next farm manager, and have you asked them if they want to?”
If there is no successor, then there should be an estate plan, he added.
“Filing your income tax on a cash basis allows for the deferral of tax through the use of various strategies. But when you exit the business, this tax becomes due and payable, and the biggest beneficiary of your estate could be the Canada Revenue Agency.”
Developing an exit strategy and working with an accountant will minimize the tax payable, he said.
If you have a successor, it’s best to develop a shared vision for the operation.
“The vision is the shared image of the family’s definition of success and what the family wants the business and legacy to be,” said Dehod. “Having a clear vision allows the family to set goals and address the dreams of the family. This is critical to the success of the family, the individuals and to the farm business.”
The discussion should start with a meeting and asking some simple yet challenging questions, he said, such as:
- What do we desire for our family, the founders, the successors, and those non-farm members?
- What will our family story and legacy be?
- What do we want for the next generation and possibly into the next?
- How will our family values influence our vision and where we want to go?
- What will we do and not do?
- How will the farm business be part of our family vision?
- Who is leading the farm business now and into the future, and how are they leading?
“Although the answers to these questions may not be clearcut, they can provide a good base for discussion and the start of a plan,” said Dehod. “These answers will also create an awareness for that 10-year plan and a go-forward framework on how the business will evolve. They will also provide clarity to all involved including those who no longer live on the farm.”