For those of us fortunate enough to have sons or daughters who want to ranch, succession is a major event. Done properly the results can draw the family closer together, give each generation what they desire and be a positive event. When done poorly the results can be devastating. Families can be torn apart.
My first experience with succession was in 1972. My two brothers and I made a deal to buy the family ranch from my parents. I was married, one brother was married the other one was single. We were all good workers and had good intentions. I was the leader, with my brothers’ agreement.
Things didn’t go well. After six months my older brother decided to leave. We were still getting along but he could see that things weren’t going to work out. At the end of the first year my younger brother left. Unfortunately by that time things were not going well at all. There was a lot of hurt, misunderstandings and anger. I am thankful that over time we have been able to repair the damage that was done.
Looking back I think I can understand why things didn’t work out. We had no clear goal, communication was weak, and the division of duties and responsibilities were unclear.
We spent the next seven years ranching with my parents. Things went very well. My father was very easy to work with. He gave me a lot of rope. I basically ran it as my ranch. The only thing missing was security. At Bev’s suggestion I started my second experience with intergenerational transfer.
I made one attempt to buy the ranch from my parents and finance through Farm Credit. It was to be a 25-year deal at nine per cent interest. Everything looked fine until I figured out that I would end up paying three times the original value of the ranch. I thought, how can I pay three times the value of the ranch, make a living and expect to have something to retire on? I tore up my agreement with Farm Credit.
In 1980 Bev and I purchased the family ranch from my parents. I give my Dad a lot of credit for making this work. He made the price high enough that I had to work and be attentive but low enough that I could be successful and have a wonderful life. We valued the ranch on the year-end net worth statement (a relatively low value). This sum was divided into 16 equal payments with no interest.
We are still reaping the benefits of this sucessful transfer today. My Mom and Dad had many years of enjoyment from the ranch after selling it to me. The ranch is still bringing my brothers and sister and their children together. It is the strongest family bond we have.
My third experience was with my own children. I had two married sons who wanted to ranch. The first and best thing we did was to hire a facilitator. Even though I do this type of work I knew I would never be perceived as being neutral. Being owner, Dad, father-in-law and facilitator was way too much power for one person. We hired Kelly Sidoryk, a holistic management certified educator. Kelly can be contacted at 780-875-9806. We held two weekend sessions away from the ranch. Kelly helped us develop a holistic goal. It deals with quality of life, production and landscape. Everyone had input into the wording. This was the single most important thing we did to make our succession plan successful.
The other extremely valuable thing that Kelly had us do was to divide our ranch into four areas: people, production, marketing and finances. One of our sons has responsibility for two of the areas; the other son is responsible for the other two. My role is to be an advisor. Over time we will rotate so that each person has had the responsibility and experience for all four areas. The idea is to develop everyone’s skills and ability to manage the entire operation. We feel this is important in case of injury, sickness or untimely death.
We gifted each of our sons and their wives one-sixth of the shares in the corporation. The result is that each family owns one-third of the shares. We manage as a team. We make all our decisions by consensus. We never vote. At the urging of my sons I have the power to make a final decision in the event of an impasse. In seven years I have never had to use this. With our clear goal and good communication, I don’t think we will ever need to use this power.
We have two married daughters. They receive a small income from the ranch each year. We also plan to have enough profit so that we will be able to help our daughters and their families with cash from time to time.
I want to share some things I have learned from working with farm families.
The first thing is that the estate belongs to the parents. The parents have the right to do whatever they desire with their estate.
The second point is that sons and daughters have no right to expect their parents to give them part of the estate. But they have every right to ask their parents, “Will you help me?” or “Is there a place here for me?” If sons and daughters asked and were independent enough to make their own way we might avoid the classic situation where sonny is 50 years old but can’t sign the checks yet.
One of the pitfalls people often encounter is what I call hidden expectations. Your son or daughter has been home working on the farm. There has been some level of pay but underneath they think they are worth more than they were paid. At some point in time they feel they are owed something because of their underpaid labour. This is a very destructive situation. It can be avoided by doing things in a businesslike manner. Here’s the job, this is the pay. Are you satisfied? Do you understand the agreement?
I think there are two keys to a good intergenerational transfer. One is a good quality of life when your children are growing up and the second is profit. If the farm is all doom and gloom or 24-7 work, it’s not likely your children will choose to farm. If on the other hand you have a good quality of life your children may say “I’d love to give my children the same opportunity.”
I encourage you to think about this, and do some serious planning now. Remember none of us know how long we have. A well-executed succession plan can bring great joy. A poorly executed plan can bring untold stress and sadness. It’s up to you.
Don Campbell ranches with his family at Meadow Lake, Sask.,
and teaches Holistic Management courses. He an be reached at
306-236-6088 or [email protected]