The Farm Transfer: Talking and Planning with Your Family
Getting started
One of the most critical issues in the "life" of a farm business is the preparation for the
transfer of the farm to the next generation -- a process that is often hard to think about, let
alone act upon. Many farmers do not want to deal with the topic because they do not know
where to start, and they find it a difficult subject to broach with their families.
If you start early, the idea will not be so overwhelming as the time approaches and the topic
will become a natural item of family discussion. The process of planning for your retirement
and the eventual takeover of your farm by your child or children should really begin 10 to
20 years before you retire, so that by the time you are approaching retirement, the plan is
in place and you can begin to carry it out.
Planning your farm transfer is a process that occurs over many years, and involves many
details that you cannot take care of overnight.
The very first step in the planning process begins with finding out how both you and your
spouse feel about the future. Do you both have the same ideas about retirement? What do
you both want for your children? What do each of you see for the farm's future?
Following are some questions you can ask yourselves in order to get started:
About your retirement:




When do you want to retire?
Where do you want to retire?
How much money do you need in order to achieve the above?
What's the best way to obtain that money? (From farm sale, farm rents, savings,
pensions, etc.)
About your children:



What do you think you "owe" them -- that is, what should you give them and what
should they buy?
What ways can you help them get a start in life, without sacrificing too much
yourself?
What do you think they want from the future?
About your farm:


Do you want the entire farm to stay in the family?
Would you be willing to sell it to non-family members in order to divide up your
estate in equal portions?
Problems that may arise
Now that you have the thought process going, you will probably begin to see some potential
problems because many of your goals conflict with each other:





You want to get the highest possible price for your farm in order to enjoy a
reasonable standard of living in your retirement years.
On the other hand, you want to see your children get a good start --which would
mean selling to them at a low price or giving them the farm.
You want to satisfy everyone, yet you want to keep the farm intact as opposed to
splitting it up and selling or gifting it to different children.
You want to be able to provide for children who will not be farming.
You want the family to be supportive, understanding and satisfied with your
decisions.
These conflicts can be resolved, but it's going to take thought, lots of discussion, and some
possible compromise.
Thoughts on your retirement
Most couples spend a lot of time concentrating on their children's future and the future of
the farm, and do not think through their own retirement needs. Firstly, you must decide
where and when you want to retire. Then you must realistically plan how much income you
will need in order to do this. Only then can you determine whether gifting or selling is
appropriate.
If you are planning to sell, how much the children will be able to afford to pay is a
consideration, but it is not the only one. Your welfare is at stake here, too!
Many parents underestimate how much money their future will require. If you need help
determining your future needs, contact your Manitoba Agriculture home economist or farm
management specialist.
Thoughts on your children
Perhaps it's time to re-evaluate your thoughts on your children and what you do or don't
owe them. In fact, you really don't owe them anything. Your children will grow up with the
attitude you instill in them; if you lead them to expect the family farm as a gift, they will do
so. If you teach them that they must work or pay for the farm, this will be the attitude they
will have.
You should also look at which children are interested in the farm business, who works well
together, who works well with you, and who has the skills and ability to be successful at
farming. Other considerations are the contributions made by the children to the farm and
the contributions you have made to your children's future so far (such as university tuition
and interest-free loans). Also of concern is when specific family members might be ready to
take over, and whether that timing coincides with your retirement plans. Above all, it's
important to set a good example for your children, so they develop a positive attitude about
the farm -- they see a love of the land, satisfaction in farming, and family contentment.
Thoughts about the transfer
Now that you've done some homework and you and your spouse agree, it's time to talk
things through with all members of the family. Planning for a farm transfer has many
emotional tugs for those involved, and can result in hard feelings (especially if offspring are
older). It's up to the parents to try to be as diplomatic as possible, and to maintain good will
among all family members.
Remember that a farm transfer involves more than writing out your will. There are many
steps you can take now to facilitate a successful and profitable transfer for all involved.
For example, one of the biggest concerns in farm transfers is capital gains tax - the tax on
profit you make from selling the land, buildings and machinery. There are ways of
minimizing capital gains taxes, and your lawyer, accountant or Manitoba Agriculture, Food
and Rural Initiatives farm management specialist can tell you what they are. They can
suggest which method or combination of methods best suits your farm situation.
The hard part – discussion
Many parents are concerned about friction that may result over farm transfer discussions.
That friction, however, will be far worse if everything is a surprise and the farm transfer
plans only become known at the reading of the will.
Tips on negotiating with a family member


Listen for objections and let the
person know you recognize his or
her concerns. Ask for his/her
solution. "I know you're not with
me on this point. Can you come up
with an alternate solution?"
Remove the offending point to see
if you can agree on everything
else. Ask the person, "If your
concern can be taken care of,
would you agree with my
proposal?"


Let the other person's resistance be
your cue. It may indicate that you are
pushing too hard and that you are really
the inflexible one. If there is too much
resistance, perhaps it's time to stop
doing what you're doing, as obviously
it's not working.
Watch for and act on verbal and nonverbal signs that indicate a turning point
in the discussion -- either increased or
decreased resistance.
Take your thoughts and ideas to the family. Then, let each person have input into the
decision-making process. Many people find it useful to have those involved write out their
requests and opinions. The same goes for possible solutions and alternatives.
Another valuable tip is to make the process an ongoing one, with discussions on the topic
taking place regularly. Planning for the farm transfer is a very important aspect of your
family's life, and discussions about it should be a big part of their life as well.
If there are disagreements, try discussing a number of solutions and their positive and
negative aspects. At this point, some compromise may be necessary on everyone's part.
The most important thing to remember in family discussions is not to talk, but to LISTEN!
Keep the communication lines open, the ideas flowing and the process moving forward!
Developing your plan
Using your family's input, your ideas, and suggestions from the professionals you've talked
with, you can now go ahead and make your farm transfer plan. Once you make a decision
on a particular aspect of the plan, don't act on it right away. Think about it a while to make
sure it's right and fits in with the overall scheme of things. Then modify it if necessary.
Once you make a decision, it's very important that you tell the rest of the family. That way,
each member will be aware of what the future holds for them -- and can make his or her
own plans accordingly.
10 steps to planning your farm transfer
1. Start the process early! Using your values as guidelines, work with your spouse
to identify your retirement, family and farm goals.
2. Determine how much money you will need for your retirement lifestyle.
3. Decide together what role you see your children playing in the farm transfer.
4. Talk with your family. Depending on their ages, have family members put their
goals, ideas and requests in writing.
5. Talk to an accountant, lawyer or farm management specialist to see what
options you have.
6. Develop your farm transfer plan, think about it, be sure about it. Further family
discussion may be necessary.
7. Take the necessary steps to make your plans a reality. It is likely you will need
professional help.
8. Present the farm transfer plan to all family members.
9. Review your plan yearly to ensure it still fits in with your family situation, and
incorporate any changes such as births, deaths, marriages, divorces and
financial changes. Utilize any tax or legal changes that could benefit your plan.
10. Pick a date for stepping out of the farm business and stick to it as much as
possible.
Used with permission. Prepared by Jill Falloon, PHEc and Donna Hastings, PHEc, Family
Living Specialists, Home Economics Section, Manitoba Agriculture, Food and Rural
Initiatives. 915 - 401 York Avenue Winnipeg MB R3C 0P8. Phone: (204) 726-6381.