Building Bridges: Transition, succession, estate planning?
By Maggie Van CampFeatures Farm Business
Navigating the confusion: decoding estate, succession, and transition planning in agriculture.
A great deal of confusion surrounds the words “transition”, “succession” and “estate” planning. It’s not surprising, as they’ve been used interchangeably and our knowledge about them has evolved quickly over the last few decades. Also, historically death tended to care of transferring farms to the next generation.
Today, the average age of Canada’s farmers is 56 and, as a result, multiple generations are farming together. Also, farm asset values are at historic highs and farms are more complex than ever before. It’s has become more complicated to transfer a farm from one generation to the next.
So, let’s start by understanding the difference between estate, succession, and transition plans so you can think more clearly about what you need for your family and how to use it on your farm.
Estate planning involves figuring out the distribution of your assets and wealth when you die. Basically, an estate plan legally defines who gets your stuff and your money at death, usually in wills and trusts.
It’s important for everyone, starting at 18 years old, to have a will. It is a simply way for you to give your family the peace of knowing your wishes during a time when emotions and vulnerability can make decisions difficult. An estate plan is part of a transition or succession plan.
Succession planning is how to transfer a business and responsibilities from an exiting generation to the next generation. Not only does this include the transfer of assets but, involves training the next generation farmers so they can move with competency and confidence from labour to management to ownership.
It involves learning how to make decisions together collaboratively, including the awkward people-decision like defining roles, responsibilities, career paths and compensation.
Succession tends to have connections to inheritance because the word succession is based on the old-world term of “succeeding” the throne. Such as, after the queen dies, she will succeed all the reigning power of their kingdom to the prince.
That’s why about 10 or 15 years ago the agriculture industry in Canada agreed to use the term “transition planning” instead of succession planning. Planning for transition has a broader meaning than succession as it used for non-family, tends to be more strategic, and is on-going, in other words, not a one-time event.
Additionally, transition plans tend to be more focussed on how to transfer control of labour, management, and ownership, when the exiting generation is still alive and active in the business.
The idea of using this term instead of succession was to alleviate the fear and procrastination often associated with traditional succession. However, despite these good intentions, a decade late succession planning is still the most used term used within the farming community.
When I searched the internet for “farm succession” over 20,500,000 results popped up whereas a search for “farm transition” resulted in only about 110,000.
To add to the confusion, some people also call succession and transition planning “business continuity” planning.
Honestly, I use transition and succession planning interchangeably. If it helps you to take actions toward setting up our next generation of farmers for success, I really don’t care what you call it. However, I think it does help to understand that an estate plan is not a succession or transition plan.
There’s power in the process of doing a transition and succession plans, as your family learns how to communicate and navigate the most complicated and satisfying change in their entire lives.
In January, Maggie Van Camp will be launching FarmComms – a multidisciplinary foundational approach to succession with on demand video training and one-on-one coaching so your farm and family can learn how to better communicate.
Maggie Van Camp is co-founder of Loft32, a company with the goal to help elevate people, businesses and the conversations on food and farming.
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