How do I plan the succession of a family farm?

A farm succession plan is a sequence of decisions, and the order matters. CFIB describes succession planning as the safe and orderly transfer of assets and warns that poorly managed transitions can lead to a premature sale without the full value of the business. What a succession plan actually contains lists the general parts; a farm adds land and family.

Decide who owns, who operates and who is provided for

Begin by separating roles that often sit with one person today: owner of the land and equipment, operator of the daily business, and family members who will not farm. Writing down how each is treated gives the lawyer and accountant something definite to implement, and it surfaces disagreements while the owner can still resolve them.

Check the rules that attach to the land

Land is where provincial rules bite. Saskatchewan’s Farm Land Security Board administers farm ownership protection, which regulates the ownership and operation of Saskatchewan farm land by non-Canadian entities. Manitoba lets non-Canadian individuals and corporations apply for an exemption to acquire an interest in farmland above a set size. In British Columbia, the Agricultural Land Commission’s application pages include a section on subdivision in the Agricultural Land Reserve, which is worth reading if the plan is to divide a farm between siblings.

Match each asset to a transfer route

CRA’s rules turn on how property moves. For transfers to a child, it provides a longer capital gains reserve for family farm property, which covers land or depreciable property used in farming by the owner, a spouse, a parent or a child, along with shares and partnership interests. An accountant models each asset’s result, ideally well before the transfer date.

Line up the financing

Farm Credit Canada lists financing for young farmers as well as transition financing options, tools and resources, which can matter when a successor buys out relatives instead of receiving everything as a gift. Ask lenders early what they will want to see in the plan. How do I value a business for a family transfer? explains the pricing question.