Just like no farm is exactly the same, it is unlikely that each farm’s succession plan will be the same. Succession planning focuses not only on the current circumstances of the farm, but the future of the farm and the goals of both the current and future generation of farmers.
Succession planning varies from estate planning in that often estate planning focuses on what happens upon the death of the farmer. Whereas succession planning can occur at various points in time, such as when a new generation is joining the farm, or maybe the farmer is looking to retire and transition the farm. Succession planning focuses on the future of the farm and the goals of both the existing farmers and those that are joining the farm, either now or in the future.
Depending on the unique circumstances of the farm and the ultimate goals, a variety of professional advisors may offer input and advice as to what a successful succession plan may look like. Because of the variety of issues that may arise in succession planning (which are not just limited to estate planning or tax implications) one single professional advisor is unlikely to be able to provide advice on all aspects of a succession plan.
Some advisors that may contribute to a succession plan are:
- Financial advisor
- Insurance advisor
- Lawyer or mediator
- Internal manager
Notably, each of the key players in the farm (i.e. all of the individuals who have an interest in the farm) may have different advisors. Therefore, some plans may require further cooperation or collaboration between advisors in the same discipline.
When it comes time to start the discussion about your succession plan, putting together your team of advisors and ensuring those advisors are working in harmony can increase the chances of the ultimate plan being successful.
To start the planning process, it will be important to identify a lead advisor to flush out the goals of the plan. Again, if there are multiple parties involved, the goals might be different. Maybe at the early stages of succession planning there is conflict amongst the generations as to how the farm might be managed going forward. Or maybe the farm involves a partnership, and one partner wishes to succession plan and the other is not ready to take those steps. If so, perhaps the use of a mediator, or other interest based professional, at this stage can help with the discussions and dialogue about the common and competing goals of the various parties.
That said, while a mediator’s skill set can help with dialogue and interest exploration, maybe some of the goals or ideas need to be tested from a legal or accounting perspective. Throughout the process your lawyer or accountant can work as part of your team to provide their expertise to test the options being explored. Having those professionals involved throughout the process can minimize the risk that a resolution is reached, but then the implementation is impractical or produces undesired results from a legal or accounting perspective.
Similarly, in most farms a vital part of succession planning is ensuring the departing farmer has financial security to provide them the standard of living they deserve and want. To develop a retirement budget or a financial forecast the expertise of a financial planner may be vital. That financial planner or advisor can work with you to determine your retirement goals and then that information can be turned back to the other advisors to develop a plan that ensures those financial goals are met.
While it may seem daunting to have multiple professionals at the table all at once, a strong succession planning team can work to your benefit to ensure the variety of expertise is available as it may be needed throughout the planning process. It is not to your benefit to develop an entire plan to only find out at the time of implementation that the plan falls apart, potentially for a reason that could have been readily identified by another professional earlier on if asked.
For example, a succession plan could fail if there are not adequate provisions in place for cash flow within the farm or financial security for the departing farmer(s) involved. Plans can also fail when there is a miscommunication between the parties, or no one has identified that various players have varying goals from the start.
Bringing the advisors together at the early stages of succession planning allows for an opportunity to develop a game plan and ensure all of the advisors are working together towards the common team goal: developing a successful farm succession plan for you.
Kimberly D. Visram
STEVENSON HOOD THORNTON BEAUBIER LLP
500 – 123 2nd Avenue South, Saskatoon, SK S7K 7E6
The information in this guide is not legal advice. We encourage you to consult with your legal advisor for specific advice.