Intergenerational land transfers are huge steps for all parties involved. Clear communication can help this process be a celebration
By Kate Ayers
The day parents can pass their land on to the next generation is a special moment and provides promise that the family’s farming traditions can continue.
However, it is a long road to get to this stage and the senior generation should keep a few things in mind when planning to gift land to children.
Maintaining records early in the next generation’s working life is a good place to start.
“We as humans think that our memory is better than it is. We think, ‘We’ll remember this,’ but in one year, five years or 25 years, our perception of what actually happened tends to be biased in our favour,” Patti Durand, an ag transition specialist with Farm Credit Canada (FCC), said to Farms.com.
Also, “the giver and receiver tend to perceive things a little differently,” she said.
“Tracking puts a number on things. It requires partners to have conversations about value. We sometimes assume we’re talking about the same unit of measure, but often we’re not. People perceive different values for the same item, for example. Record-keeping gets rid of some of that ‘muddiness.’”
While relying on acts of good faith often works out in ag, this approach may not be the best choice when your business and family relations depend on clarity and dollar values.
“By putting actions down on paper, it requires business partners to go a bit further than just hoping things will work out in the end and everyone will be compensated fairly,” Durand said.
“For example, the senior generation knows exactly how much it costs to farm, including the costs of equipment and land. When they are giving these items as gifts, they know the value, but perhaps haven’t given the receiver a chance to understand those numbers. This situation can lead to either generation feeling underappreciated and undervalued.”
To ensure all parties have clarity throughout the entire gifting process, “document each transaction,” Durand said.
“If someone commits to using sweat equity, document the annual value of that labour. That value can then be given in land when the time comes. So, the land really isn’t a gift at that point. The partner has earned it or at least a portion of it.” This reality is an important distinction for non-farming family members.
Indeed, “record-keeping creates transparency and clarity for other family members who are not directly involved in the farm. “If this step is missing, it can really drive a wedge in families,” Durand said. If senior and junior partners can show other family members how the land transfer process took place, they may avoid hard feelings.
The best way to keep track of business items is to keep the protocol simple. Farmers can use a do-it-yourself spreadsheet or FCC’s tracking sample to include in their records.
“In any other corporate role, you would never enter a working arrangement without a contract, agreed-upon salary, benefits, bonuses, etc. Jobs on the farm tend to have all of these things, but they are unwritten. Without putting a value on them, the receiver may feel undervalued,” Durand said.
To avoid these situations, farmers should record what their employees receive in dollars, in-kind values, compensation packages and sweat equity, if applicable, she said. “Everyone is clear on what they are putting in and getting out of the farm.”
Farmers cannot underestimate the power of communication and transparency.
“Senior partners tend to know exactly how much work and land values are and sometimes assume that their junior partners have a clear sense of what those values are, too. Because many in-kind farm benefits don’t show up on income tax returns, junior partners never get a T4 slip that outlines some of the perks that they receive throughout the year.
“Humans desire to be valued and it is helpful when we respect that,” she said.
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