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Balance sheet bootcamp for
family farm succession
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If family farm succession is
in your future, the people and
services of RBC Royal Bank®
can help.
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Inter-generational family farm succession can be an emotionally-charged process. It's not hard to see why. In any succession plan, the older generation's legacy and the incoming generation's aspirations need to be reconciled. This is complex, emotional territory.
By contrast, the financial side of the succession can be approached more objectively. The goal is to transfer assets between generations at a fair price for all parties while minimizing tax liabilities. Issues such as financial structure (corporations vs. sole proprietorships vs. individual title), book value and market value quickly come into play.
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"There's also a balance to be struck between paying off mortgages and loans as soon as possible, and maintaining an adequate level of working capital for the farm's day-to-day operations," says Paddock.
"Beyond structuring the new owners' banking arrangements, we can also contribute ideas on growing the farm business while managing risk. As you go through your family's succession journey, we'll be with you every step of the way."
- Gwen Paddock,
Vice President, South Western Ontario Agriculture for RBC Royal Bank
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The older generation needs a predictable, secure income to fund their living expenses, vacations and other activities during their retirement years. The younger generation needs to assume ownership and management of the farm business on terms that are sustainable. In some cases, succession involves not two generations, but three.
Valuation is key. If farm assets are under-priced, the older generation could find it difficult to maintain a comfortable lifestyle in the coming years. If farm assets are priced too high, the future viability of the farm could be called into question.
If family farm succession is in your future, the people and services of RBC Royal Bank can help.
As Gwen Paddock, Vice President, South Western Ontario Agriculture, RBC Royal Bank, explains, for the younger or incoming generation, it is critically important to structure farm liabilities in a way that reflects the useful lifespan of the asset being financed.
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Agriwebinar
Your Farm - Your Future, What's the Plan
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RBC Ag Podcast
Handing Over the Reins
Minding the Generation Gap in Succession Planning
The Funeral Home - Succession Planning
Starting The Succession Discussion
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Farm Business Guide
Succession Planning
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®/™ Trademark(s) of Royal Bank of Canada. RBC and Royal Bank are registered trademarks of Royal Bank of Canada.
RBC Royal Bank | Royal Bank of Canada l RBC WaterPark Place, 88 Queens Quay West, 12th Floor, Toronto, ON, M5J 0B8, Canada l www.rbcroyalbank.com
This article is for informational purposes only and not intended to provide specific financial or other advice. Consult a professional before taking any action so your personal circumstances are taken into account.
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