Successful Succession Planning Takes Time, Communication and Work

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In addition to legal documents, soft skills are critical to passing down farm legacies when it comes to successful succession planning.

The hard work growers put into their operations year after year is at risk – not because of unavoidable disasters caused by Mother Nature – instead by something altogether avoidable. Many growers work in dangerous conditions day-in and day-out without planning for their or their family’s future.

Legacy planning is a critical step every farm needs to take to ensure the hard work put in the farm doesn’t go to waste due to poor preparation. And it isn’t just senior adults who need to plan for farm transitions – tragedy can strike at any age.

First Complete a Couple Legal Forms

Sometimes getting started is the hardest part. From a paperwork perspective, there are a couple documents everyone should have on-hand.

“Power of attorney (POA) and wills – the two basic coverages people need – are not age sensitive,” says John Stewart, attorney in Winnipeg, Man-based D’Aarcy & Deacon LLP who handles primarily agricultural business law. “Once we’re over the age of 18, a power of attorney gives someone else the ability to act on our behalf if we’re unable to do so—such as in the case of an accident.”

Once a POA and a will are completed – noting updates will need to be made every three to five years – it’s time to start the hard conversations.

Start the Conversations about Transitions

Once families are legally covered for the unexpected, it’s time to sit down to figure out expectations from all stakeholders.

Brent VaParys
Brent VanParys family enterprise advisor and consultant at BDO Canada LLP

“People love to jump to the legal agreements and the documentation first and those technical issues are important,” says Brent VanParys family enterprise advisor and consultant at BDO Canada LLP. “But there’s a lot of groundwork to do before you get to that point, and it centers around alignment. Do we agree on what we’re doing? On our challenges?”

The whole family should be involved in this conversation – even the ones who have expressed they don’t desire to be involved in the operation’s day-to-day activities. While they might not be the one who takes over, they still have stake in what happens once the matriarch or patriarch passes the torch.

“Communication means we can help the family come to grips with the elements of transition, so everyone has the right information they need to ensure there’s no misunderstandings,” VanParys adds. “Then we can make sure the business is prepared for a transition and it can remain viable and meet everyone’s – albeit not all the same – needs.”

What does this mean? It’s time to schedule a real conversation with the whole family.

According to VanParys, these discussions should look like a funnel with the biggest overarching goals at the start, and more detail added in each step:

  1. What is the family and farm trying to achieve in broad terms? What are the family values? What is the overall goal for the legacy of the farm? Is preserving family ownership important?
  2. What are the challenges to achieving the family’s high-level goals? What needs to be addressed in the transition plan to ensure the legacy of the farm moves in the right direction?
  3. Who is going to champion finding solutions to the challenges? How can this person or persons help provide clarity and understanding for all stakeholders?

Start having hard discussions — who wants to be involved on the farm? If someone isn’t involved, what is a fair alternative that provides the next generation of farmers what they need without forgetting the other heirs? What are the goals for the farm? Once these issues are identified and solutions discovered, then they family can put the plan into action.

Note finding what’s ‘fair’ in a transition is difficult and will likely mark the biggest challenge to creating a succession plan. Fair isn’t the same for each family member but it’s something that needs to be agreed upon.

Start Including the Next Generation Earlier

It can be one of the most difficult parts of transitioning an operation for the primary owner, but it’s critical to start involving the next generation in stages. When they’re young, teach them day-to-day activities and as they grow older start involving them in decision making and business operations.

John C. Stewart
John Stewart, attorney in Winnipeg, Man-based D’Aarcy & Deacon LLP

“Between the ages of probably 12 and 30 most operators are working with the next generating by having them learn how to do seeding, operate equipment, apply fungicide, etc.” Stewart says. “In the middle of your 20s it’s probably a good idea to have this next generation learn through a college or university to acquire management tools they’ll need going forward.

“Then, when they are in their early 30s, (the most important part of the succession plan) have that next generation start to truly manage the operation. Have them get involved in all things, capital planning, budgeting, working with bankers, working with insurance agents. Have them start to understand marketing, financial management and what it takes to be successful,” he adds.

Ultimately, succession planning comes down to doing everything possible to ensure the next generation has what they need to be successful. From legal documents conferring ownership of land and equipment, to the knowledge base needed to operate season after season.

Start planning early – well before retirement is even a thought – to ensure the most successful transition for the entire family.

Do You Need to Differentiate Personal and Farm Documents?

Whether it’s a unanimous shareholder’s agreement, a partnership agreement, personal will or a power of attorney (POA) for medical and personal property, there is considerable value in having a clear understanding of everyone’s expectations. The easiest way to do this is with separate documentation.

“You should have a power of attorney for your property, and you should have one for your medical procedures,” says John Stewart, attorney at Winnipeg, Man.-based D’arcy and Deacon. “In Canada, we have a living will that deals mostly with medical issues in the event that you’re unable to make those decisions for yourself, then we have a general power of attorney which is covering your property and everything else that you’re doing on a day-to-day basis.

“A corporate will is not a document that is enshrined in the law. Usually, corporate intentions are set out in a unanimous shareholders agreement that sets out the rights and obligations of each of the shareholders in the company and the rules under which the company is going to be operated,” he says.

Working through the many different legal documents is complex, but necessary in the event of a disaster or accident. This protects growers personally and the farm operation at large so all parties are appropriately represented.

“I also recommend there should be conversations about what’s in wills and powers of attorney documents,” adds Brent VanParys, family enterprise advisor and consultant at BDO Canada LLP. “These should be available to the people who are impacted by them, and they should understand the rationale behind the various decisions.”

Transparency before the inevitable happens can save surviving family members heartache and ensure the wishes of the previous operators are carried out properly.

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