Just eight per cent of Canadian farmers have a written farm transition plan in place, according to the national Census of Agriculture.
Discussions around retirement, mortality or family dynamics can be sensitive conversations to broach, and so many operators simply put it off.
"Some conversations are extremely difficult for our clients to have; discussions around mortality, fairness,” said Kagan Sirett, an accountant and partner with MNP LLP in Lloydminster, AB. "They can't see a path forward in terms of where they want to land, so they don't know how to start.”
On Jan. 11, Sirett and other experts from across Canada participated in an online panel discussion in recognition of Farm Transition Appreciation Day to talk about ways to make the process easier on producers.
Most experts agree producers should start early and keep communication open with everyone involved, including not only family members but also their accountant, financial planner, banker, lawyer and others with close knowledge of the farm's operations.
Kelli Potter, a lawyer and partner with Patersons LLP in Brandon, MB, said more producers are also engaging the expertise of a farm management consultant. These specialists usually have a background in financial planning or accounting, and can analyze an entire operation to help producers figure out how to reach their goals, Potter said.
“These farm consultants can be so invaluable because they actually help bridge that ideological gap from one generation to the next in a way that lawyers and accountants and bankers and financial planners just simply can't,” Potter said. “They understand that management component in the industry.”
Big questions facing producers include who will take over the operation when they retire and how to equitably allocate assets between farming children and non-farming children, she noted.
Words like “responsibility” and “fairness” crop up frequently in those discussions, Potter said, but they can mean different things to different people.
“We often have to really dive into some hard conversations with folks and get them to tell us what those things mean to them, and where they want to ultimately see a resolution in terms of who takes over which assets and how that's done,” she said.
Oftentimes, just letting the client know that they aren't alone, that other producers experience the same challenges, can be helpful, noted Wendall Kerr, a financial planner with ITI Financial in Medicine Hat, AB.
Challenges regarding transition planning are actually quite common, he said.
"Family is the most complex institution in the world,” he said. “Many of us think our problems are unique to us, but they're not.”
Lorna McKercher agreed.
She suggested tackling the issues head on, recognizing from the outset that they will be difficult discussions to have, but keeping everything in the open so everyone is on the same page.
“It's good to acknowledge it up front and start working on it as soon as possible because you never know when some other event will come up more suddenly,” said McKercher, Royal Bank's vice-president of agriculture for southwestern Ontario. “So to have it dealt with and know what the plan is is key.”
Sirett cautioned that farm transition planning doesn't take a one-size-fits-all approach.
Every situation is unique and each operation will need a customized plan to address its individual needs — what one farmer does at their farm won't necessarily work for another.
“Really, the bedrock of any advisory service is forging that relationship with our clients,” he said.
“That enables us to understand really what actually is keeping them up at night and greases the wheels on the communication, which we would all agree is key to a good succession plan.”
A farmer's goals can also change throughout their career, Sirett noted.
Starting out in farming, their focus may be viability, wealth protection, or risk management. But toward the end of their career, those priorities may shift to family harmony or the future of the farm.
Sirett said a good advisor will keep that conversation going through all stages of a producer's career and create a “holistic” plan to address their needs.
All the experts agreed that transition planning takes time and persistence and isn’t something that’s going to be achieved overnight. But the effort put into it will be worth it in the end.
“It's not a destination; it's a journey. We have to remind our clients that this is a process that we don't want to stop,” Kerr said.
“Even if you're out on the tractor, there are going to be things to do. Keep the momentum going, and don't let it stop, because it's really hard to start it again.”