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We all know that farming is unique compared to all other careers. One of humankind's oldest and hardest-working professions is more than a business to you – it’s your entire life. Perhaps you have a long and wonderful family history with your property. You love to wake up at the crack of dawn and work all throughout the day past nightfall. Farming is your world and you work hard for your business. However, sometimes good things must slowly end to allow a new chapter of your life to begin.
It’s time to think about the future of your business. As golden as the wheat fields you grow, your golden years are upon you and it’s time to not only start planning your retirement but what will happen to your business after you retire. For many farming families, transferring your business down to your kids is one of the oldest traditions in the book. Times have changed though and there are many new challenges farmers face when looking into succession planning.
It's time to call a family meeting.
It’s important to review early on who you will be officially transferring your business over to. Normally the answer is your child(ren) or another close family member, but have you discussed with them if they want to take over your business? For many farming families, their children have decided to pursue different careers or professions, so it’s important to not solely rely on your children to take over the business if that isn’t what they want. If your child has decided to take over your business, are they fully prepared for the responsibility? Have they gained the proper knowledge and skills to run the business successfully? It’s recommended that you sit down with your (potential) successor and discuss it with them completely if they’re ready to take on this venture.
When Passing Down Your Farm…
There are a few things to consider. Be sure to review business goals with the family member(s) you are transferring your farm over to. Some families find it easy to formulate a plan, but others may seek professional advice. There are also a few different ways to transfer your business:
- Bequest – you can pass down your business and assets as part of your will.
- Gift – If financially capable, you can gift your business and assets to your successors (this is great for your children, but many farming families can’t afford to do this).
- Sell – You can sell your business and assets to your children/successor.
As a great alternative as well, you can combine all three of these methods if you want. With in-depth planning and help from a tax and financial advisor, you can plan it so your kids have less of a financial burden when taking on your business and you can still earn an income on your business while it operates in your retirement – securing your own financial future. If you would like to get some background information on transferring your farm business, check out the Ontario Ministry of Agriculture, Food and Rural Affairs website and when you are ready to connect with me, we can start the conversation on the future of your family farm.
But, what if your successor(s) doesn’t want the farm?
Let’s not jump to negative thoughts right away. Maybe your children have dreams to pursue other careers and that’s great. You can’t force your kids to take over the business if they are unable to or don’t want to. We want to see our children succeed in life and by pushing them into a profession they don’t want, it can possibly lead to negative financial repercussions for them and for your retirement income. Let’s say for example that your child takes on your business, not because they wanted to but because they felt pressured to take on your business and ‘carry on’ their family history. If they aren’t investing enough time or if they don’t have the right drive to keep the farm running smoothly, it can compromise their financial future and yours! Another issue you may run into is if you have multiple children. If only one of them wants to take over the business, the other children and the parents have issues with one child receiving more benefits than the other children. This can create a major stumbling block to succession planning and too often, parents don’t know what to do and simply avoid planning. This can increase the delay in payments of inheritance and significantly increase funds lost to probate fees, legal and accounting fess. Not to mention estates will now take years to settle as opposed to months when planned properly.
If your only plan was to have your child take over your farm when you retire and they choose not to do it – there is no need to panic. I understand that choosing to own a farm can be an incredibly big decision. In the fall of 2016, I inherited (along with my two brothers) our family’s farm that belonged to my aunt and uncle. This farm had been in our family for over 100 years and I had spent most of my summers working on the farm. Neither my brothers or I wanted to drop everything to become farmers so as difficult as it was to sell something that had been in our family for so long - it was just the right time. So, I understand first hand the importance of your farm and the history it holds. However, if your successor doesn’t carry the same passion for the farm as you did, and they drag your business down, is that really going to uphold the legacy of your family history?
Again, there is no need to worry because there are other ways to keep your vision of retirement in sight. By following along with this four-part series, we will explore all the opportunities for your business and different avenues you can take to go from running your farm to enjoying your retirement.
Related: Discover the Top Health Expenses to Expect in Retirement