5 ways to ease farm transition angst
When Chris Delaney talks about estate planning, he knows many Canadian farm families face common challenges. Yet, for every difficulty, there’s a solution.
Delaney is an author, speaker, facilitator, family business consultant and member of the Canadian Association of Farm Advisors.
Here are five methods to help mitigate estate and transition planning challenges:
1. Plan for black swan events
Black swan events — unpredictable occurrences beyond what’s normally expected, and which could have severe consequences — are extreme rarities.
While divorce or a serious disease diagnosis are tragic, they aren’t black swan events and during transition and estate planning, should be considered and included in the plan.
But what if a cancer diagnosis comes before life insurance is purchased? What if an adult child dies after the distribution of wealth and before the older generation dies? These black swan events can pack a powerful blow to a family and easily derail transition planning.
Know that black swan events heighten your transition and estate planning risk. Work with a professional advisor who will help you consider as many situations as possible.
2. Think of transition planning as a process, not an event
Assess shortcomings in the transition planning process by identifying blind spots with an advisor.
Start with a family meeting to get everyone accustomed to distributed decision-making and shared responsibility for stewardship and asset creation. After further meetings, shared family values are identified, and the family mission statement is created.
Delaney says the family should consider their personal objectives for the farm operation and what they envision the family accomplishing together with the farm. Then, collaborate, compare and work to find agreement for collective family farm goals. Once the goals are set, the family and its advisors can map out the process to achieve the objectives.
3. Plan for people, not assets
Opening the door to conversation throughout the lifetime of the farm operation helps with transition.
Planning for farm assets, rather than preparing for the heirs, can be a significant challenge in intergenerational planning.
Most involved in transition planning are highly concerned about issues such as taxes, powers of attorney, life insurance and probate tax.
Opening the door to conversation throughout the lifetime of the farm operation helps with transition, as does working together for the long-term, multi-generational success of the farm.
Delaney says even details such as consideration of the trustee and a beneficiary are important.
“The trustee is stepping into your shoes,” he explains. “This person must have a relationship with your beneficiaries that’s at least as healthy as the relationship you had with them, if not better.”
Nurture that relationship during planning, he says.
4. Let family know what you want
Don’t assume survivors know your intentions – that’s like believing they can read your mind.
Ambiguous phrases such as “for reasons my survivors will understand” or “as you know” in a will or transition plan can be meaningless and frustrating for survivors. Be direct. Be clear with your instructions for the farm.
5. Deal with your emotions
Fears and other emotions at play during transition planning have rational outcomes and can therefore be planned for.
Delaney says when considering the distance between the emotions involved with transition planning and the actual decision-making required, planning stops, procrastination sets in, and the process freezes. Then, when it comes time for action, it’s hard to move on.
However, between the fear of planning and the act of decision-making is a safe space where addressing emotions and productive planning can happen. Delaney encourages farmers to cultivate a safe emotional place and continuously check in with the family to address any fears. Utilize advisors and make some small decisions first.
Nurture conversations, share decision-making and acknowledge that farm transition planning is a process, not a single event. Addressing fears and bringing in professional transition advisors can help farm families create successful plans.