Farm succession — minus the success
Friday, February 3, 2023

Section: Wills, Estates, Wealth Transfer

By Ralph Pearce, Country Guide January 31, 2023

With insight from CAFA member, Elaine Froese

Could your farm find its way out of this kind of mess? It’s a very real question for some Canadian farms — maybe even one on your road — and because of that, and also because of the sensitivities involved, Country Guide has agreed to use false names for the very real members of the farm profiled below.

Here’s the situation we found. One day when “Will” was still a teenager, his father “Mike” told him that he wanted to set up a succession plan. Mike had been thinking of his own start on the farm and how he’d bought the family farm shortly before his dad died. Mike hadn’t realized at the time how good a move that was because it turned out his father hadn’t updated his will since before Mike had been born, so if Mike had figured on his Dad leaving him the farm through his estate, he’d have ended up with nothing.

Mike proved good at farming. He grew the farm and diversified it, transforming it into a large and complex modern Canadian farm. It only made sense to talk about transition.

Mike had also mentored Will, giving him opportunities and more responsibility.

“My dad evolved the business from a small one to several large ones and I went from ‘the kid’ to the manager,” Will says. “It was never in my job title, but I had all of the responsibilities.”

Everything seemed on target. When Will had graduated from university in the early 2000s, his parents had asked him to come home, both to help run parts of the farm and also to act as what might be called a kind of admin assistant. As in so many farm transitions, Will would build equity by working for his parents instead of for someone else. It was a plan. The stage was set.

Best of intentions
The plan worked well at first. Will learned how to manage various parts of the business, although he recalls now that a lot seemed to be happening at fast-forward speed. New building projects were underway and new ventures seemed to always be in the air. But there were still no job descriptions, no detailed lists of responsibilities, and no budgets.

“As I became more skilled at managing, there was more conflict with my Dad because I desperately needed to increase our management and put some mechanisms in place to ease the growing pains as the business expanded,” Will says. “The onus on due diligence and professionalism — labour laws, environmental stewardship and fiscal reporting — kept increasing. I was building the plane as we were flying off the cliff.”
Inevitably, it now seems, things threatened to go south. Tempers flared. There were more disagreements between Will and his siblings and father, and Will and his wife Bethany (they married three years after he came back to the farm) left to look for other jobs. (Note: “Bethany” is also a pseudonym).

It seemed a pivotal moment, and after considerable hand-wringing, his parents entered into an equal partnership with Will and Bethany, and the two returned home.

The original agreement called for an equal share between Will, Bethany and Will’s parents. Mike would refinance the farm and roll the assets into the partnership, while Will and Bethany would use their wages to pay their living expenses, and any profits from the business would be reinvested.
Will took on more management and production responsibilities, Bethany managed the equipment, and Mike would be on site to help ensure the work got done.

Mike’s wife (Will’s mom) helped to hold things together, and the plan was that as the farm kept growing, they’d hire additional personnel. Again, it’s a common story.

Changing priorities
Somehow, conflict spread. “When we had children and the business was no longer my only priority, there were a lot of problems,” says Will. “My father had stopped letting my mother be part of the decision-making process a few years before that because, in his words, ‘she couldn’t see the big picture’.”

Once their kids were born — despite his still working full-time — Will was no longer able to participate in planning sessions for similar reasons.
The farm had worked when the four of them were contributing, but now it was coming apart at the seams, and non-farming family members who didn’t understand farming and weren’t able to contribute skills or funds to the farm were getting worried.

Country Guide wasn’t able to talk to Mike, but Will’s view is clear. “Despite many different proposals prepared by Bethany and me to allow my parents to retire and my family members to have the ability to participate in the farm in various capacities, my father wouldn’t budge on his wishes,” he says.
Through an intermediary, the siblings told Mike they had no interest in the farm and that Will and Bethany should be the ones to take it over or buy him out. It seemed a potential turning point, but after a lifetime making decisions on the farm, Mike was certain he knew best.

To make matters worse, Mike got fed up and dictated that it was time for Bethany to get a job somewhere else, says Will.
Yet somehow, he says, he still expected her to help with the books and continue all her other roles on the farm.
She questioned that, but she says his response was: “‘You’ll just have to get more efficient.’”

Mike was the patriarch. It was tough to call him out. He always had a reason for what he did.

Then came another blow. Just before the pandemic, Mike decided that instead of sticking with the plan to sell the remainder of the farm to Will and Bethany, he would create a legacy and make the non-farming children (and future generations) 50 per cent owners in the farm businesses.
Will and Bethany argued it was already a challenge to find the dollars for the farm to pay back debt or update equipment and buildings, let alone provide passive income to shareholders.

Worryingly, Bethany adds, Mike was still buying assets, which he was able to do even though she and Will couldn’t cash-flow them because he was in a high-equity position.

“It became a matter of, not of ‘Who will inherit the throne?’ but ‘Who will inherit the loan?’” Will says.

They became concerned. Was Mike experiencing a mental deterioration due to an undiagnosed illness? Originally, Will wondered if Mike was suffering from Alzheimer’s or dementia. But he wouldn’t see a doctor for a firm assessment. To this day, Will wonders if his abrasiveness was the result of a series of mini-strokes or maybe some kind of drug interactions.

The upshot was what most readers would expect. Instead of working towards succeeding the farm, relations on the farm have grown more combative. Hostility is just under the surface, plus a readiness to assign blame as well.
Despite the assistance of a family coach and succession specialist, the family has a big question: Is a successful transition of the farm even possible?

The legal avenues
Of course, though, it got even more complicated. Will and Bethany now felt they needed to recoup something to compensate for their years of sweat equity and to obtain some form of restitution for low wages. With a growing family, they couldn’t just quit. They were co-owners of the operation. Yet because of the terms of the partnership, the assets were all shared so they couldn’t take things and leave.

“We tried to buy some parts of the business from my dad but he determined it was all his,” Will says. “We couldn’t take on additional jobs because we were already maxed out on keeping the farm going. But I wanted to be able to at least take our very small equity position with us — in assets, cash, inventory — I didn’t care. Just so we could have a fighting chance to farm on our own.”

One adviser suggested the couple walk away and use the courts to get Will’s father to negotiate.

They did, but that led to its own problems and stress points. Once the papers were filed, the bank began preparations to call the couple’s loans.
It was close to a melting point, but it seemed for a time that maybe success was within reach. Mediation talks started up with Mike, but again the two generations were embroiled in controversy, with Will and Bethany feeling that Mike was always moving the goal posts.

And, of course, by now there was also the pandemic to deal with, Will notes.

To make matters worse, Bethany’s own health suffered, and she not only had to handle stress of the family conflict on top of her own illness, she also had to help her kids with virtual learning.

“While I was running myself to exhaustion looking after the farm, my dad kept phoning Bethany to show her I was the cause of this problem — which caused more stress,” says Will.

With the approach of the deadline imposed by the bank — and with no progress being made and neither of them sleeping, it was decided that Bethany would move with the children and live with her mother. Importantly, there was no timetable for her return.

Hard as it was on his own, at least Will knew everyone else was safe. Fortunately, without Bethany in the picture — and with the bank’s ultimatum looming — his parents signed off on the necessary legal papers within a week.

After that, it took 16 months to get the partnership valued and dissolved and the assets distributed among the former partners, using cash to make up the difference. The taxes were finally filed in 2022.

Today, Will and Bethany still do some custom work for Mike but even that requires very firm boundaries.

They also count the cost. “Since we lived on the farm, the house was an asset of the farm,” says Will. “Since it took so long for us to sell the house back to my parents, we had to buy a new place to live. That meant we weren’t able to offset our capital gains exemptions from the sale of our home in the same calendar year, so we had to pay a large amount of taxes after the dissolution.”

Unfortunately, capital gains exemptions are designed to pass assets to the next generation, not back to the founders. So Will and Bethany have used up the majority of their capital gains allowance already, before they can start planning for their children’s future in farming.

The road back
The impact on Bethany’s health — and on Will’s — was enormous. Their confidence and mental health suffered while they spent countless restless nights trying to figure out how to extricate themselves without losing the equity they’d earned.

If there is a bright side, it came with a final crisis. Bethany had long thought Will’s father needed help. Now, she could see, the prolonged struggle left her and Will weakened and in need of help too.

She found a therapist an hour away who didn’t understand farm life but did help. “She was fantastic,” says Will. “I have to admit it was hard to train her about agriculture but it was also an interesting learning curve for me. ‘Regular people’ don’t understand the logic of sweat equity or unsafe working conditions. She helped me to question a lot of the habits in our farming family lifestyle that I simply wasn’t aware of, and to see that the reality I had been accustomed to wasn’t healthy for myself, my family or anyone else.”

Will has also tried to re-evaluate his attitude toward his father. “In his heart, he means well,” he says, but he still wants Mike to get a professional assessment.

And although he speaks about him somewhat more generously, he and Bethany still feel Mike is unable to change and that the relationship has been irreparably damaged. Their focus used to be the family farm. Now they focus on their own family, and their own future.
Now, Will says, he knows to prepare himself. “I think the worst is yet to come.”

Find a way forward
It’ s okay to feel overwhelmed, despondent or unable to conquer the world. Life does have a habit of throwing up the unexpected. But there comes a time to confront the issues instead of turning away from them.

“We talk about identity and farmers being the salt of the Earth,” says Elaine Froese, Manitoba-based farm family transition expert. “What really strikes me are the 25 per cent of farmers with suicidal ideation … I want to work at destigmatizing that depression and mental illness are something like dirty laundry: they’re not!”

Froese has written about struggles with Alzheimer’s, dementia and the ravages of other mental illnesses or diseases. Her father-in-law suffered from a genetic brain-shrinking disease while her father was diagnosed with Alzheimer’s. Although cancer, heart attacks or strokes can motivate people to start their succession planning, decreasing brain function and mental illness can be harder to assess.

“This is a very personal thing for me — personally, but also as a coach,” says Froese. “Avoidance and procrastination and not dealing with things in a timely fashion can become a crisis. It’s one of those ‘Ds’ that have become commonly cited in agriculture — death, divorce, disaster, disagreement, dementia and, unfortunately, denial.”

Although there are several worthwhile organizations that are at the forefront doing more to help with dementia, Alzheimer’s or other mental illnesses, the scale of the issues on the farm in immense. And so is the isolation. Yes, the agricultural community has come 100 miles in the past five years in recognizing the effects and limitations of dealing with decreased cognitive functioning. The sad news is, we still have 10,000 miles to go.

Getting help isn’t easy — especially help that works on the farm. Froese once asked a cattle producer she was coaching whether she’d received help from the Alzheimer’s Society representative she was seeing. The response was, “No, absolutely none — because they don’t understand what it’s like to run a farm with someone who’s not mentally there. They can’t fathom the 24-7 pressure of that.”

Froese is working with another farmer who, in his 40s, thought he’d be the successor of the farm, only to be diagnosed with bipolar disorder. The farmer’s father believed his son would drive the farm into “rack and ruin” because of his condition but Froese is trying to counsel the son, telling him there are others who can help keep him on track.

“It doesn’t mean his life is over, it just means there’s a new reality to navigate,” says Froese.
Coping with mental illness can be more difficult due to what she refers to as ambiguous loss, where the illness breaks off small pieces, yet no one knows when the next little piece will crumble too.

“As farmers, we can produce crops, we can have profitability and cash flow,” adds Froese. “What we don’t have is people who can navigate the emotional factors affecting planning, which is the family dynamic, and having people feel safe and respected to express what they need.”

The statistics
In 2018, Dr. Andria Jones-Bitton and Briana Hagen from the University of Guelph published the results of a benchmark survey that gauged the effects of mental illness in rural Canada. More than 1,100 farmers were interviewed and the findings were telling: 35 per cent of producers met the criteria classification for depression, 43 per cent were “high in cynicism” and 38 per cent were classed with “high emotional exhaustion.”

Five years later, there are producers and family members who’ve been helped, but many others are still looking, still trying to cope or denying there’s any kind of a problem. For Lauren Van Ewyk, that’s a special challenge which she’s working to remediate. As co-founder and chief executive officer of the National Farmer Mental Health Alliance, she acknowledges all forms of barriers to finding help: the lack of availability of counsellors who are versed in agriculture’s realities, the isolation that goes with farming — even poor internet connectivity.

“We’re now in a unique place where farmers know that others have been hurting,” says Van Ewyk, who holds a master’s of science in mental health counselling and is a registered social worker. “We know someone who has died by suicide and farmers who are struggling with stress and addictions. We see farmers leaving the industry and children not wanting to continue the legacy in some situations. Children in rural areas are four to six times more likely to die by suicide than in urban populations and among our male youth, we see some of the highest rates of substance abuse.”
Van Ewyk acknowledges the toughness of farmers and their resilience. They’ve faced floods and drought in the same year, barns burning down and collapsing under snow loads in the same year, and they’ve faced the piling up of difficulties and chronic stress. What they have trouble with is turning that resilience to their own mental wellness.

Research conducted in 2016 was updated in 2020 and the situation has become more critical, with the pandemic played a role in that deterioration. But there are other issues including the growing divide between farmers and consumers. It’s also harder to access grants — because of too much paperwork — and for livestock producers, there are growing challenges finding large-animal vets.

“There are issues that farmers face when they have so many things beyond their control, including policy development,” says Van Ewyk. “I’m excited for programs that are willing to cross that great divide and work individually with farmers. Is it enough? The answer is ‘no.’”

Some of the programs crossing that divide include initiatives developed from government funding and the private sector. Farm Credit Canada has stepped up and there’s the Farmer Wellness Initiative based in Ontario and the Farmer Wellness Program in Manitoba, as well as similar efforts in other provinces. Van Ewyk also cites the Gateway Centre of Excellence for Rural Health and the Mental Health First Aid Canada program, administered by Mental Health Commission of Canada. They may be individual efforts yet they dovetail to cover more of the issues facing farmers and the rural community.

Van Ewyk’s own Farmers Health Alliance is doing its part by training therapists, with 25 people involved in the first training session, and a long list of other clinicians — from Canada and the U.S. — who want to take the course.

“It’s called ‘Agriculturally Informed Therapy,’ and the idea is that we’re a different group, we have our own cultural identity and that’s a big topic for agriculture and farmers,” says Van Ewyk. “Our goal is to ensure that when farmers do reach out for help, they reach a clinician who has that lived ag experience — and our training, ideally — to ensure farmers’ needs are met effectively.”
It’s a start with a long ways to go.
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