Many conflicts arise because the older generation is risk-averse and doesn’t want to take chances with the wealth they’ve created, while the younger generation is eager to take a chance in order to create wealth.

But what if the child finds a nearby farm to purchase for expansion purposes and fixes up the farmhouse that comes with it either for the parents or themselves? The parents no longer have to worry about where they will live upon retirement, and the child and his spouse will usually relish the freedom that comes when you’re no longer living in the same yard or house. When both sides start thinking, ‘Hey, this could turn out pretty good for me,’ you know you’ve got a win-win situation, says McConnell

Farm succession advisors aren’t miracle workers. But many farm families are surprised at how the process of confronting problems in a calm, logical way can almost magically create opportunities where none existed before.

“Once you get the issues on the table and you show people what can be done, then they really open up to the process,” says Vince McConnell, a farm transfer advisor in the Outaouais region in southwestern Québec.

An advisor has two great advantages. First, he or she is able to get both sides to speak openly – and honestly – about what they want. Second, a good advisor has been through it all before and knows what has worked for other farm families in your situation.

Here’s examples of how advisors have dealt with some of the toughest farm succession issues.

Tough Issue No. 1: Dividing the pie so the parents, kids and non-farming siblings are all happy.

These days, it’s not unusual for farms to be worth $1 million (or more). If you think in terms of a bank mortgage, you’d be looking at $100,000 down and payments of $5,000 or more a month. Who can afford to farm with expenses like that?

But if you look at it from the viewpoint of retirement income, the whole picture can change dramatically. Often, payments to the parents are treated as capital and therefore aren’t taxable. In that case, a $2,000 monthly payment (in addition to Canada or Quebec pension payments) might be all the income they need (especially if housing costs – see below – aren’t an issue). Spread over 20 years, that translates to a no-money-down, second mortgage of $480,000 – a much more do-able plan.

If the parents decide that their personal estate – funded by that 20-year income stream – will only go to their non-farming children, you may have solved much, or even all, of the always tricky problem of giving non-farming children a fair share when it comes to inheritance.

“It’s important that your advisor be well connected with accountants, lawyers, loan officers, and other professionals so he or she can bounce ideas off them in order to get the family rolling in the right direction,” says McConnell .

Tough Issue No. 2: I don’t want my daughter-in-law to get the farm.

How do you bring this one up without ruining Christmas forever? This can be an issue even for those parents who simply adore their child’s spouse. After all, they’ve worked hard for 30 or 40 years to build up the farm assets and considering today’s divorce rate ... well, who knows what can happen? So most parents are at least a little worried that if they pass the farm onto their child and he or she gets divorced, then their ex daughter-in-law or son-in-law will end up with half ownership and the whole thing will be a complete mess.

Obviously, you need a lawyer to advise you on your particular situation,but most people find their fears are overblown, says McConnell. In general, the law recognizes a person’s contribution – directly or indirectly – to a business enterprise. Which means they’re entitled to a share of the increase in the farm’s assets during the period they were actively contributing.

By sorting out the financial and legal issues, succession planning significantly reduces the chance that the operation of the farm will be thrown in chaos if there’s a marriage breakdown. And settling a festering farm succession situation is going to take a whole lot of the pressure off your child’s marriage.

Tough Issue No. 3: Dad isn’t ever going to let go.

Being treated like a kid or hired hand when you’re 30 or 40 years old is perhaps the greatest source of conflict in family farms.

But it’s amazing how quickly things can change when you’ve solved two big pieces in the succession process, says McConnell. The first piece is a workable financial plan and second is housing, he says.

If you can find a way to get each party their own property, a lot of the control issues disappear. And the beautiful part, says McConnell, is that you can use another high-tension issue to solve the problem.

"Article courtesy of the Canadian Farm Business Management Council and www.farmcentre.com"