Nobody expects to be hurt in an accident and we all take wise precautions. But it happens to some people, sometimes. A freak situation, a tiny distraction, a sick animal or faulty machine can do it. That's why it's important to take farm succession planning seriously.
What is farm succession planning?
Farm succession planning is the process of planning for the transfer of a farm business from one generation to the next. It involves identifying the future leadership of the farm, determining how assets will be transferred, and developing a plan for the future operation of the farm.
The goal of succession planning is to ensure the continued success of the farm business by minimising disruption during the transition period and providing for the financial security of the retiring generation. This process typically involves legal and financial professionals, as well as family members and other stakeholders, working together to create a comprehensive plan that addresses both the short-term and long-term needs of the farm business.
Are you prepared?
What would happen to the farm if you were permanently injured and could not make decisions for yourself? Would the Public Trustee take over, run your farm, charge a fortune, throw the family off, move you into a nursing home? Have you appointed a personal guardian just in case? Have you taken time out to plan and implement the succession plan you want?
It is easy to put it off. Then one day it might be too late! What if you were killed and there was a fight over who would take control and ownership of the farm? What if you had made it clear in your will, but your will was challenged in court? One thing I learned from very early in my Chartered Accountancy career was that you can’t control anything after you are dead.
Set up your plan now
It is best to set up a farm succession plan while you are alive, in the way you want it to be when you are dead.
Do you have a husband, wife or partner who you would like to take over when you are incapacitated or die? Then set it up now. Have you children or one particular child who you would like to take over the farm? Best to set it up now and if it is only one of your children, do it so that everyone is happy about it, so it stays out of court.
What would the bank do about your mortgage or overdraft if you have them? Would your family have access to the money to pay farm bills? Would the bank call in the money then auction the farm?
Farm succession solutions
It is best to control the process, but don’t do it so you lose control before you want to hand it over, or so that the profits belong to others instead of you. Whatever you do, don’t involve the moneylenders. There are better ways to get your money out of the farm than putting the kids into debt to do it.
No succession planning is difficult to do, but what is often overlooked is the process of getting it just right, protecting the farm and ensuring that you do not lose control earlier than you expect, like you can with a trust.
What I find very important with clients, is to discuss expectations privately with each of the family members and then host a family discussion to find the common ground that matches the expectations of each member of both generations. That helps farmers ensure that it will work when the time comes. Then a harmonious transfer can be activated and everybody has participated in the planning so there is every likelihood that it will work perfectly and all your years of work will have paid off just as you wanted.
Clients comment that we are like family to them. In a sense we are. We don’t impose our “expert” views on a family. We help the family work out what they want to do. Then, in conjunction with their accountants and lawyers, we help them do it. That way everyone is happy.
Contact GBAC to get started with your farm succession planning.Article by Greg Bloomfield Ret, FCA, CPA, ACIS, FICD. Retired sheep and cattle breeder. Succession planner.