Succession planning is the “passing down” of the property of farm and ranch operation from one generation to the next. Chances are your farming operation has already been part of a progression from one generation to another. As you near retirement, the question looms before you, whether to sell to an outside purchaser or to pass the farm on to your children.
On a large grain farm in Saskatchewan, Marcel helped make succession into a systematic step by step process. His understanding of farms and ranches and the process of passing them down is the most comprehensive available. Right from asking the important questions to determine if succession is the right path to take all the way to signing the documents, Marcel LeBlanc has assisted and advised in this process countless times and is the authority on farm succession planning.
In the process of succession, there are three primary portions of the farm that need to be transferred to the next generation; these are Effort, Ownership, and Control.
- Effort – The effort portion of a farm is the time, labour and responsibility a person has to the farm. As your children grow, often they naturally are taking on more responsibilities and putting in more time on the farm.
- Ownership – Ownership and control are often interchanged, but here we recognize them as two very distinct, separate portions of your farm. Ownership of the farm company is determined by the number of common or preferred shares the company has, who owns those shares, and what each of the shares are worth.
- Control – Control of the farm can be kept separate from the ownership of the farm by the creation of a new class of shares in the company. These new shares are voting shares, and can be distributed however you see fit. They can also be transferred to your children in whatever portions and on whatever timeline seems right.
In addition to these, there are several more issues that need to be addressed when planning out the succession, two of these are Security and Risk Protection.
- Security – The security to the exiting partners that their future income needs and estate plans are maintained. The security the next generation has that there is sufficient capital for them to continue farming and that they receive recognition for their ongoing efforts.
- Risk Protection – Allocation of shares and voting rights can be structured to address liability risk and divorce. Insurance can be purchased to protect family members from liability, disability or death.