Peter Boys CAFA
Boys Financial Services
In a recent financial tip, I talked about the biggest issue that a third of Alberta’s farm or small business families are facing over the next five years, that being the sale or roll-over of their farm or business enterprise.
For many farm families, selling may be their only option if the kids have all left home for jobs elsewhere, or have no interest in farming. For those looking to transfer the farm to the next generation, there are many issues to face and resolve, with the legal and tax issues often much easier to resolve than all of the emotional family related ones.
Coming from a mixed farm in England and being involved for 27 years in various sectors of the farm equipment business, including over eight years as a partner in a farm equipment business, I have seen first-hand the issues that families and businesses face, and the related problems and strife that result from a lack of proper planning.
With many farm and small business operations today, short term tax objectives often conflict with succession planning strategies. What’s in the parents’ best interests is not always the same as their children’s. Then there are common issues that farmers and small business owners tell me they don’t like - paperwork, paying taxes or professional fees and facing up to all the tough emotional issues. The reality is farm or small business sale or succession planning requires an in-depth review of paperwork, and some tough decisions. Working with a team of professional advisors to develop the needed strategy, and communicating with all family members directly or indirectly involved in the process.
Outright sale planning is often simpler than rolling the farm or business to the next generation, which requires consideration for the parents of such issues as a place for them to live and sufficient funds to provide income for the rest of their lives. A common issue relates to fairness for all their children, especially for those families and businesses with a child or children involved in the business and others who are not, leading to such questions as: Will the farm operation be viable for the child/children taking over? What potential conflict might develop with the other children as a result of this?
I run across many family farm and small business operations with no formal succession plan, often with adult children 40 plus working on the farm as poorly paid hired help, doing so on the hope of eventually taking over the family operation, but in most cases with nothing on paper to say this will happen; also in many cases having other children not involved in the business, but who expect to get their share of the farm or business value when the parents sell out, or pass on.
If this situation sounds familiar, why not get started into the planning process now and you will be well prepared for the eventual transition ahead of time.
Think about it, if you had started five years ago, you could be done by now, just like eating an elephant, one small bite at a time!
