The Rural Voice, 2001-01, Page 34the farming operation, says
Rose. Parents need income
to support them in their
retirement years. The
money has to come from
active business income,
either from payments from
the children or from sale of
the farm assets.
Jt will be important to
manage farm capital
well, investing farm
profits in the right assets.
Parents can help protect
their future situation while
they're still farming by
investing some of their
profits off -farm rather than
plowing all their money
back into high-cost
overhead items from which
it can be difficult to get any
money back out.
One of the best
succession planning tools is
one of the oldest: have your
will prepared. If you die
without a will, the
Provincial Trustee will take
control of your estate. "Do
you really want a stranger
to decide how your assets and you
farm will be distributed?" Rose asks.
While agencies like OMAFRA
can give you an overview of the
issues involved in estate planning
and farm transfers, it doesn't replace
the advice of professionals in the
specifics of the process. In fact, the
fees you pay to the professionals
could be the best investment you'll
ever make.
Many people recommend a team
approach. Your accountant should
have experience with farm taxation
issues involved in a farm transfer.
Your lawyer can help you set up
notes and mortgages and can help
make sure your will is properly
structured to provide a basic transfer
plan in the even of untimely death.
Insurance experts are also now
providing some creative solutions to
estate planning issues, particularly
when it comes to finding money to
fairly distribute your estate to all
members of your family, not just the
son or daughter who takes over the
family farm. In some cases, for
instance, you may want to buy life
insurance at a time of your life when
you wouldn't ordinarily be thinking
Inventory, such as livestock, is often sold on
account, with an unpaid invoice that is paid off
over a number of years to reduce the tax liability
to the parent.
30 THE RURAL VOICE
about insurance, because the payout
will help provide the non -farming
children with their fair share of the
estate without jeopardizing the
financial security of the ongoing
farming operation.
But beyond the technical and
administrative details of transferring
a farm from one generation to the
next, there are people issues — new
stresses that will test the family
bonds. The farmer has been a sole
proprietor of years, used to working
independently but now, taking in a
child as a partner, must share
decision-making. "Once two people
have to work together, the working
relationship has changed," Rose says.
"Partners are team members who
have to talk, share decision making
and who have to learn how to fight
without hurting each other. Family
relationships add more complexity to
the new `team' relationship."
The parent, he says, has to see the
child as an adult and then relate to
the adult person they are working
with.
The human dynamics come into
the equation, Rose says. People are
different• some are natural born
leaders and communicators
while others make great
team members but are less
inclined to take the risks
associated with leadership.
Other people just want to
work alone. Anyone
participating in a
partnership needs to be able
to step back and assess their
own behaviour if human
dynamics become a
problem.
"Think before you act. Be
diplomatic. Work it out, or
get out," Rose advises.
Before entering any kind
of permanent partnership,
Rose advises a short testing
period to see if the
arrangement has potential
for working. He suggests a
two-year period, where the
child works for a wage or
receives a profit share, will
help you find out if the two
of you can work together.
That way if it doesn't work
out, your son or daughter
can still go on and set up
their own operation without
your involvement.
"Using a testing period leaves
doors open, and doesn't create the
trap that the new barn or the new
mortgage does," Rose says. "If the
working relationship doesn't work
out, you have left an escape route —
you have protected your family
relationship. The alternative usually
means one less family to come over
to your place at Christmas."
Communications skills are
critically important to a
successful transfer of a viable
farming operation. As the size of
agricultural businesses grow, the
larger businesses require teamwork
and co-ordination. "People can't read
minds, so they have to learn how to
work together effectively," says
Rose. "Regular business meetings
where communication is open and
decisions are made by consensus, as
much as is practical, keep conflict to
a minimum."
Communications skills include
watching what you say and how you
say it, Rose says. "If you are going to
work as part of a team, don't hurt
your team members with harsh
words. Provide ' constructive