By Connor Lynch
WINCHESTER — The vast majority of Ontario farmers talk about succession planning but few do anything more about it.
Cash crop farmer Lloyd Crowe, 62, is one of the proactive ones. He’s working on succession planning for his Prince Edward County farm. He farms with his uncle Larry, 71, and used to farm with both his uncles. But he and Larry bought out uncle George about eight years ago, when George was 82.
That buyout only came after years of conversations, sometimes contradictory ones. Said Crowe: “For 20 years, whenever a piece of property came up for sale, (George would) say ‘we don’t need anymore land, just buy me out.’” Finally, Crowe approached George and said, since he’s getting older, maybe it’s time. “His first reaction? ‘Oh, you don’t want me around anymore.’”
Crowe, who started farming with his uncles right out of high school is grateful for all of his opportunities. He’s hoping to pass them down to his kids (his uncle, Larry, doesn’t have any children). But he knows that it’s going to be a long process, best started yesterday.
According to a survey by the Ontario Federation of Agriculture of 140 members, more than 90 per cent of farmers talk about succession planning but none of the farmers surveyed had anything written down. According to the 2016 Census of Agriculture, fewer than 10 per cent of farmers have a written succession plan.
Hugh O’Neill, a Financial Advisor with O’Farrell Financial Services in
Winchester, Ontario, has spent over two decades in agricultural banking.
He works with farmers on succession planning and says these
conversations can be the most difficult ones that farm families ever
have.
Most farm families that Hugh
has worked with went into the process with good intentions and came out
with good results. Hugh believes the biggest difficulty is getting
started. The best way to get started is to get an outside professional,
or professionals, involved, he said.
“Most families really do need a third party in the room to pull them together,” he said. The nature of farming as a family business, often a multi-generational one, can make it hard for farmers to separate the business from the family.
Another advantage to outside expertise is that they bring experience and do not harbor any assumptions. Many farmers that O’Neill has worked with have had succession plans stall out on a small, incidental detail. “Families succession plans often get stalled on one small point that really is not that big of a piece of the whole puzzle. But they get caught on it and can’t get the conversation past that point.” He often tells clients the story of a succession plan for a multi-million dollar farm that was completely derailed by an argument about who should get a $200 set of Snap-on tools. Hugh says, “Don’t let the Snap-on tools bog you down.” Issues like it are inevitably going to come up. A key thing to note is that in a multi-million dollar plan the issue is never about the tools. There’s always a story behind the tools that “represent an emotion, not the asset,” he said.
One of the key elements of succession planning is one of the hang-ups farmers run into: What are they going to do when the farm belongs to someone else? O’Neill recommends getting a retirement plan into place before a succession plan gets nailed down. “That’s what holds people back; they can’t envision how things will be OK when they make a major decision like that.”
Another important point is that it doesn’t have to be all-or-nothing right now. Farmers can gradually transition ownership of the farm to their kids over time. O’Neil recommends getting those details sorted out earlier rather than later. You want to be having that conversation when you’re in your 60s, not in your 70s. The golden rule to start planning is the 60-30 rule, he said. Parents in their 60s, kids in their 30s. “Planning ahead of time, (succession) becomes a non-event. It’s in the plan. Here’s what we’re doing this year. This is what we’re doing next year.”
And for farmers struggling to get past their desire to hang onto the farm, their fear or anxiety about what comes next, O’Neill recommends skipping to the end-game. Ask yourself: “If you passed away yesterday, how would this farm be running today? We all pass away someday, and our farms won’t come with us.” If you want a say in how the farm runs after you have passed on, you have to talk about it while you are still alive. This line of questioning is another reason why O’Neill recommends getting an outside professional involved early. Death is a difficult topic to broach, especially for family.
Farmers also need to be flexible. Some farming parents come in with the idea that they will control how the farm gets run long after they are gone. Their children might react thinking, “Who wants to take on a dinosaur?” he said. Parents may assume the children will farm but the kids may not have any desire to. At the same time, the children who wish to take over the farm need to be realistic. Some come into succession planning thinking they’ll get the whole farm for free.
Emotional currents run deep in agriculture, as deep as some family histories of working the land. Farming isn’t like other careers, said Crowe. “It’s a calling. It’s in our DNA.”
His uncle Larry, like many farmers, plans to farm until the day he dies. That’s his retirement plan. But the farm has started a trust fund for him for tax reasons. They’re bringing in some of their cousins and selling them shares in the harvesting side of the business. Larry has written a will and together they’re working on a shareholder agreement.
Said Crowe: “Through it all, we’ve gotten closer, believe it or not.”
