Darrell Wade says his farming father spent a lifetime building assets but did not say how he wanted them disbursed.

When he died unexpectedly, it created a succession planning turmoil.

“I’ve spent the last 18 years making sure other farm families do not go through what we did,” says Wade who is the founder of Farm Life in Peterborough which specializes in farm transitions, estate planning and family coaching.

Wade spoke about his experience at the Southwestern Ontario Dairy Symposium held in Woodstock in February. He led a panel of three succession planning experts providing key points on keeping up with change on the farm. His fellow panelists included George Sinker, a general practice attorney; Dwayne Scott, an accountant with Wilkinson Rogers; and Franklin Famme of Famme & Co accountant firm. Wade said his parents’ farm was successful but they never really sat down and talked about the future. 

He and his brother farmed with their parents until his brother, wearing a nylon jacket, got caught in an auger.

“The good news is my brother lived. However, he lost his entire left arm. Nylon jackets do not give,” says Wade. He was the first one his brother saw when he woke up after two days in a drug-induced coma.

“How bad is it?” asked Wade’s brother.

“Pretty bad,” I said. “They had to take your left arm.”

“How will I be able to lift up my kids,” was his brother’s response.

Two years of rehabilitation and a prostheses has changed Wade’s brother’s fears but he decided not to return to the farm.

Wade took on more responsibility. It was busy but going relatively well until the year 2000 when his father died unexpectedly from a embolism after surgery.

The emotional loss was real. So was the difficulty sorting out the estate afterwards.

“My dad spent a lifetime building assets but he did not say how he wanted them disbursed.”

Once it was all sorted between Wade and his siblings, funds were disbursed but the farm was lost.

Wade built up his Family Life Financial business and says his role is to empower farm families to keep farming and ensure there is family harmony when building tax efficient succession plans.

The more families he works with, the more common concerns and roadblocks he sees to developing a farm transition plan. These include:

• Financial concerns: They don’t know if there is enough money in the milk cheque to support another family

• Fear of letting go: Being a farmer is part of the parents’ identity and they fear the loss of control

• Marital breakdown

• Family conflict: There needs to be a quantitative number given to sweat equity. Wade said in his family, it took 10 years before he and his sisters would speak again after the farm was lost

• Don’t know where to start

• Don’t have a successor

Underlying all these factor is a lack of communication.

   “You need to start the discussion. That’s the first thing,” says Dwayne Scott, who manages the agri-division for Wilkinson Rogers in London.

    He was also involved in a family farm where his father and grandfathers farmed together. As Scott describes it, the father taps the shoulder of the boy who does well at school and says “you get a career” because the brother who struggled at school will “take over the farm.”

Years later, the brothers found they forged a good team though the father never did learn to communicate very well.

He now encourages families to communicate using the Family Harmony and Farm Legacy model as promoted by Farm Life Financial.

A team is created including an accountant, lawyer and tax planner to share visions and goals.

“We bring the family around the kitchen table and our goal is to identify gaps and assumptions,” says Scott. One family member may complain that another member doesn’t work as hard as he does, or, assumes another one will want every weekend off while he has to work.

“So we help to bring clarity around expectations,” says Scott.

Part of the planning is how to keep kids in the business with an exit strategy . A process is needed to understand the common goals of the family, establish governance and deal with road blocks.

“One of our goals is that everyone involved can get together and have dinner at Christmas,” says Franklin Famme who grew up on a farm with father who was also an accountant.

“My dad did a lot of planning without us knowing,” says Famme. “When I was 18, I was given a deed to a farm to share with my siblings.”

This gifted deed was a protectionary device in his later divorce. He highly recommends Deeds of Gift in farm family settlements as one of the tools that can be used to disperse farm values. 

Lawyer George Sinker spoke to the issue of entitlement, saying no one is entitled to a farm. Children expecting to farm should be willing to “put their skin in the game.”

Like the other panellists, he believes in the team concept where the advisors go through “discoveries” to find out the needs of the family to develop themes.

“There is more buy-in when the farmers create a plan with an advisor rather than having a plan imposed on them,” says Singer.

When asked to list some effective strategies when it comes to farm transitions, the panel had this advice: 

• Develop a “Family Constitution” to establish respectable and clear ground rules for all family meetings

• Shares are an ideal way to include all family members. They can be gifted to the next generation.

• Turning the farm into a corporation allows the corporation to buy a life insurance policy on shareholders for non-farming members to receive cash when a shareholder dies

•  Start planning early and be disciplined to build an off-farm income bucket.  Houses, investment accounts, small businesses....all these can create diversity and income opportunities for other farm children.  

•  Gift non-farming children a piece of land upon agreement the farming child will rent the land.

As with any discussion on succession planning, each farm family’s needs will be specific. There are no blanket solutions.

The common denominator among all succession plans is the need to get started, to communicate, and to seek the help of experts to ensure family harmony. ◊