father and daughter walking through a farm field at sunset

Embracing the process of transition for your family farm

Embracing the process of transition for your family farm

Synopsis
3 Minute Read

Transition planning for your farm business won’t happen overnight but trust and patience will pay off for future generations.

Transition planning for your farm business won’t happen overnight but trust and patience will pay off for future generations

It’s true that a farmer never truly retires. Whether they continue driving the combine or advise their family about big business decisions from behind a desk instead of on the field, there is rarely a time when a farmer can fully step away from the business that they’ve spent their lives building.

Transition planning for farmers honours this sentiment and enables farmers to hand over the reins to the next generation while keeping their identity and stepping back at the same time. What that looks like will be different for every family.

Whether you are looking to give up some responsibilities but still be involved or if you’re looking to move off the property and keep voting shares but not much else, the possibilities are endless and should be catered to you and your family’s needs.

With MNP’s TransitionSmart program, you and your family are the priority in the transition or succession planning process. Managing your legacy while you can gives you the peace of mind, the clarity, and the ability to ensure your wishes are fulfilled and fully communicated to your family.

The TransitionSmart process

Once you’ve decided you’re ready for a change, TransitionSmart allows you to work at your own pace with an MNP advisor to determine how best to approach the process.

It’s important to note that farm business transition planning is a continuum. While it’s easy to plan for a start point, it’s common for an event to cause the trajectory to change – whether that’s an illness or death in the family, or someone wanting to get out of the business – forcing a reassessment of goals and strategies to meet them.

While every process will be unique, here are some things your advisor will help you with on your transition journey:

  • Regardless of your initial goals, every TransitionSmart engagement starts with a family meeting. By getting to know you and your family, your advisor can get a better understanding of everyone’s wishes, expectations, and the opportunities available to you all.
  • In some cases, business meetings and family meetings will be separate to help separate the two in a meaningful way. This can help preserve family harmony, setting aside time to be a family and other time to be business owners.
  • Transition planning doesn’t just go over who will run what parts of the business and how much they will own, it also works to build a wealth plan, a business plan, strategic plans (depending on timing), and contingency plans.
  • Setting up milestones, or graduation dates, is another important part of the transition planning process. It’s helpful to ask what you want to have accomplished by a certain time to help set achievable and measurable goals and keep everyone on track towards your shared vision.
  • Assessing things like governance and tax reorganization may seem like one of the more daunting aspects of transition planning but really, it can be made simple with your advisor’s help and knowledge of the industry. Additionally, tax incentives and breaks like with Bill C208 can help you plan for the future and take advantage of government opportunities when you have the chance.
  • Asking questions about shareholder or family agreements – whether they’re needed and how they could help the process – provide more insight into family roles within the business and for the ownership of the business.

Examples of transition planning

  1. In hypothetical scenario number one, two brothers, their wives and children begin transition planning when one of the wives falls ill. Four months into the transition process, the sick wife passes away and the family is left reeling from her death. Following her passing, it’s revealed there was animosity between family members prior to her death. This puts the process on pause for a year while the family grieves and thinks about how they want to proceed. In that time, other family members have expressed interest in business involvement and the process has become slightly more complicated and needed to restart. While no transition plan happens overnight, by acting sooner, this family could have accomplished more before the event that ultimately changed the trajectory of their journey in many ways.
  2. In hypothetical scenario number two, a family farm run by mom and dad has two sons and a daughter. The sons are currently involved in the business but the daughter is not. Mom and dad want to step back as dad’s health is waning. They engage with MNP and the family begins to have family and business conversations with their advisor to determine what they want, who wants what level of involvement, and how that might progress. During a family meeting it’s expressed that mom and dad want to keep living on the farm but because it’s such a central hub of operations for the business, they decide to swap homes with their eldest son and his family so that they can live nearby but aren’t in the centre of it all. The sons agree on their roles within the business and the daughter was given a portion of land that continues to be used in farm operations but that’s in her name. Dad still has preferred voting shared in the business and within 18 months from the start of the process, they had a firm plan and all parties are pleased with the flexibility and confidence they have in the future of the business. 

 

Just as every farm business is unique, so too will be their transition plan. Be patient with yourself and your family and understand success isn’t immediate nor is it guaranteed, it’s a process and a continuum that takes time, reflection, and forward thinking.

Two identical farms with 500 head of cattle, 6,000 acres of land, and three kids within five kilometers of one another will have completely different goals and strategies when it comes to succession and their outcome will be different.

Expectations, health situations, financial and economic situations may change but your vision of your business and how it can support the future generation must be front of mind.

It’s never too early to start the process as a farm business owner. Even if your children are young and transition is decades away for you, taking the time now to consider what you want your future, and the future of your family to look like will help ensure you’ve done a thorough job of planning and making choices to reflect and hopefully help you attain your goals.

To learn more about MNP’s TransitionSmart service line, visit our page and contact Trevor MacLean, Partner, at [email protected] to see how you can get started today

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