Most farmers expect to retire and hand over the farm to family, but few appear to be doing anything to ensure it happens, according to results of a newly released Ipsos Reid poll of Canadian farmers.
Just 30 per cent of 455 farmers polled for the 2015 Canadian Agricultural Outlook Survey said they are doing any formal succession planning to ensure a smooth transition to the next generation. Yet, the majority (62 per cent) say they expect to transfer it, and one-third said their farms are likely to change hands within the next few years.
The poll was commissioned by Glacier FarmMedia and polled farmers representing a wide range of farm operations in the three Prairie provinces. Farms with sales of $250,000 or more made up about two-thirds of the survey.
A Manitoba farm succession-planning specialist said she isn’t surprised by the poll results. Many farm families are putting off setting out a plan, and to their detriment, says certified farm family coach and author Elaine Froese.
There are at least 120,000 farms expected to transfer in the next decade, but without plans, many of these farms are exposing themselves to the risk of increased family conflict, and potentially even losing the farm’s successor altogether, Froese said.
“I call it the tsunami of agriculture. It’s this big, giant, silent wave that’s going to hit people but they don’t even know they’re going to get hit and there’s no warning signs being flashed off,” Froese said.
Why so few farmers are prepared to address the future ownership structure of the farm can’t be put down to being too busy either, she said. Farmers are avoiding the subject for fear of conflict, and because the value of many farm’s assets has become so enormous, “people are just paralyzed so they do nothing,” she added.
A spokesperson for RBC Agriculture, which was a key partner in developing the Outlook survey said the dearth of succession planning in agriculture isn’t much different from the lack of plans for transferring ownership of non-agricultural businesses.
But what farms without succession plans additionally face is loss of legacy, and potentially the family home. As well, the fragmentation of the farm has a broader impact on the rural community, said Gwen Paddock, national director, Agriculture with RBC.
This lack of succession planning worries lenders for a number of reasons, including seeing clients at risk of losing the legacy they’ve worked so hard to create, Paddock said.
“At the personal level, we know how important it is for our clients who’ve worked hard and to have that legacy,” she said.
But without a succession plan the financial implications can also be serious, she said.
Taxes will be impacted depending on how assets are being transferred, she said.
It differs by province but in some instances land transfer tax is not payable when you’re transferring an active farm operation to a sibling or within the family, she said.
“When you think about the value of some of these farm operations, that can represent a substantial amount of money… that money rather than going to pay tax could be left in the operation to support the cash flow and perhaps fund future growth.”
Good advance planning can also help minimize or at least prepare for the impact of capital gains taxes too. It’s advisable to start planning at least five years in advance of when you want to step down, she said.
“If you start your planning soon enough and leave yourself enough time, then you can take advantage of those options,” she said, adding that at the same time it’s critically important that farm families get good advice from qualified farm advisers, an accountant who understands the business of agriculture and legal advice.
But no farmer will begin assembling that advisory team unless they’re preparing to start the planning process, and it’s that unwillingness to do so that’s stalling this, said Froese.
“There’s no end of resources for farm families to do farm succession planning,” she said.
“What’s needed is the willingness to start talking and have facilitated meetings to take action. Nobody can drive the process except the farm family. You need a driver within the family who says, ‘we are getting this done.’”
The 2015 Ag Outlook Survey provides key information about Canadian agricultural producer opinions towards their businesses, a short-term review of their major investments and some projections about what they are considering in the near future.
The 2015 Canadian Agri-cultural Outlook Survey is a Glacier FarmMedia product published by The Western Producer and Country Guide. All farmers polled were subscribers to Glacier FarmMedia publications, which is the largest agricultural publisher in the country.
The poll was conducted between Dec. 3 to Dec. 22, 2014. Fifty-five per cent of the sample polled were between the ages of 55 to 74, and most (67 per cent) were grain and oilseeds producers. Eighty-one per cent of respondents were from Alberta, Saskatchewan, and Manitoba, and they represented farms with sales that range anywhere from $10,000 to over $2 million.