WESTERN PRODUCER — The direction that a farm family’s succession planning takes will often be determined by the retiring parents’ future plans
Fall is usually when the phone starts to ring and farmers want to talk about succession, transition or sale, says Curtis Palichuk, managing partner of Wilde Advisory Group in Vegreville, Alta.
When farmers come into the accounting office weary from harvest, they are reminded that the best farm transition and succession is a process that happens over years and not a project to be completed after a stressful season, Palichuk says.
To get the most tax benefits, fewest financial clawbacks and least family strife, the process needs to start early, when no one is thinking of transition.
Ideally, transition begins with a meeting with Mom and Dad and an honest conversation of what they want, he adds.
Do they want to retire on a beach in Mexico or live out their days on the farm? Do they want their son or daughter to take over the operation or do they want to sell it?
“That is an important discussion because with the cost of land, with the cost of equipment, it is really, really difficult for somebody that goes to college and gets a degree to say, ‘jeez, I want to go farming.’ To start from scratch, I would suggest it’s near impossible.
“Those are some of the things you want to talk about right out of the gate.”
If a child is taking over, discussions about money are required. After years of work, the parents need money to enjoy retirement, but can the farm support two families?
“This is where we sit down and calculate what is the cash requirement so they’re not starving working capital from the farm.”
If there are no children, or none interested in farming, there is a discussion about selling the land or renting it out.
“As a firm, we’re all big believers in owning land. They’re just not making any more of it. It is always going to be a source of income and value to your children.”
Palichuk says those at his company try to make it clear from the beginning of farm succession talks that there is no right or wrong way to do it. It’s a matter of trying to make it work.
“I am always really pleased when the next generation continues the farm or at least continues the land ownership chain. Life circumstances change and people have mortgages. I totally get that. There is no right or wrong.
“It’s just that I’ve seen over the generations, those that hang on to the land tend to put themselves in better stead for later life, even if you rent it out. Often it can be a nice little pension supplement.”
With high land and equipment prices, accountants stress the need for farmers to pay attention to provincial and federal actions that could affect future farm decisions.
“The sky’s the limit. We often tell people (to) just tell us what you want to do and we’ll keep you away from the tax landmines.”
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