The concepts of “succession planning” & “retirement” are frequently intertwined when discussed among farmers & their advisers because the ownership of farm property is seldom separated from the business of farming. It is best to consider farm succession separately from property ownership as
mentoring, management & ownership are very different. Understanding these terms will meaningfully assist in the transition of the farm from one generation to the next.
What is Succession Planning?
It is a process, not an event, for identifying & mentoring family members with the potential & desire to assume key farming & leadership responsibilities of a farm business
It prepares the next generation in farming techniques & management skills so that trusted family members are equipped to assume responsible roles as they become available
It ensures the farm business continues to operate smoothly after those currently in control retire or pass away
It is NOT Retirement Planning or Estate Planning although it is best to address, co-ordinate & implement all three together
Critical Components of Farm Succession: Control, Decision Making, & Property Ownership
These 3 critical components of farm succession planning must be discussed & agreed upon by everyone involved. Unfortunately, farm families often fail to separate control & decision making from property ownership, leading to strained family relations and an under performing farm business.
To assist with succession planning, a farming business can separate “The Farm” into an operational entity & a property ownership entity. This separation makes succession planning easier as it allows: a logical transition from 1 generation to the next, separates the transfer of the “family farm from personal wealth, assists in understanding what “succession planning” addresses, & leads to productive discussions between generations.
The farm family must consider many different faces of succession planning. That is, the transition of management, decision making & ownership of the farming business, and separating personal wealth from the operating assets & farm operations. It then must be decided which alternative is best, considering both generations, with an emphasis on retiring generation’s the retirement & estate.
About the Author:
Donavon K. Tofin CPA, CA, CFP
The Retiring Farmer™ Wealth Management Process & Assante Financial Management Ltd.
Don Tofin is a Senior Financial Advisor with Assante Financial Management Ltd. Please contact him and his team at 1-877-996-8696 to discuss your particular circumstances prior to acting on the information above.