10 May Succession Planning for Farming Families: What you need to know
Succession planning is important for many but especially in the farming industry. The change in the supposed ‘fair process’ of succession planning in comparison with 50 years ago, is vast. In days gone by giving the farm to the oldest male was the norm. However, the modern approach of dividing up the farm into smaller chunks is leading to non-viable farming especially considering the scale required for lucrative farming is increasing.
As such, a family who want to succeed a viable farm to the next generation, together with a fair distribution to other siblings, needs to have a long and careful planning and implementation process to increase the likelihood of success.
The perception that tension among siblings is inevitable can remain only a perception. It is possible to ensure that all siblings are happy with the decisions you have made in your succession plan – it is not necessary to leave all of the farm to one child and leave little inheritance to the rest or to ruthlessly cut up the property into unworkable plots of land and not benefit all of your children. It is important that you avoid any one sibling from having to borrow money to compensate their other siblings. Seeking professional advice will help ensure everything is dealt with correctly. The longer you have to make these decisions the better.
Despite the potential stress and dissension it may cause, it must be addressed eventually and therefore sooner rather than later is best. That way, everyone will know what to expect especially when extenuating circumstances arise; illness or injury leading to early retirement. In fact, the earlier the decisions are made, especially in the case of farming, the better. If the succession plan has been thought of well in advance of any action then everyone will be well aware of what is expected of them and any friction or dispute can be dealt while you are still around to help.
Communication is key! Statistics show that nearing retirement age farmers have not discussed their succession plan before an issue arises, and show that a few smaller conversations would have diverted the issue. Forward planning can become very significant and effective if you take the opportunity to discuss with all relevant family members. This will allow you to assemble your expectations but also ensure these align with everyone’s wants and wishes. An honest conversation with someone you might have believed to be difficult is key to successfully meeting everyone’s needs.
Often not seeing an easy solution to the division of land is the major barrier to not discussing or dealing with the issue. It is important that you are aware that there are people who deal with these issues often and as a result are well versed in understanding all of the complexities and have easy solutions to help. It is essential to involve legal and accounting professionals in the process when considering changes to the farm business structure to ensure it is completed correctly and nothing has been missed.
A good succession planner will cover all areas including:
- How can you better understand and manage family relationships to ensure a successful farm family transfer?
- The sentimental and economic value of the property
- Assist in the complicated negotiating especially when dealing with more difficult family members
- Set achievable goals
- Maintain ongoing communication between all parties
- Understanding everyone’s needs and objectives
- Taking time to have the difficult conversations and not pasting over them
- Allow for flexibility – things may not always go as planned
- Ensure education on the future implications of the plans.
- Go through and understand the “What ifs”; all the D words: death, divorce, disagreement, disability.
- Formal agreements are vital
Succession planning should be seen as a process or journey as the potential impact will last several lifetimes, be it good or bad, therefore the time must be taken to ensure it is done correctly. If you have any questions regarding what Conrad Carlile can do to help, please email us at firstname.lastname@example.org or call (07) 3871 1522 to book an appointment to speak with an advisor.