By Melissa Dickfos

Farm succession requires a lot of communication between family members to be successful.  Unfortunately, communication is often the one thing farming families can really struggle with. 
Having an experienced advisor to facilitate honest conversations about goals and priorities, helps to manage family expectations and keep everyone on the same page.

7 Steps to create a successful succession plan

Anthony Ahern, a Director of Robertson Scannell – Accountants & Financial Planners, has worked with many farming families on their succession planning and believes it is never too early to start planning.  Waiting for a trigger event such as a death, a marriage breakdown or the ill health of an integral person in the business, makes the process far more difficult and can lead to family tension … and a whole lot worse.

Succession & estate planning is a complex matter

“Succession and estate planning in a family farming business is a complex matter and requires juggling the needs and wants of the generations involved.  There is generally a long multi-generational family history, family members at different ages and life stages, a large asset with possibly a low and variable return, on-farm siblings and off-farm siblings, in-laws and out-laws and a “spoonful of emotional baggage” just to increase the complexity” says Mr Ahern.

Use a collaborative approach

He believes that a collaborative approach is required for a successful succession plan to be put in place and all parties need the common goal of wanting a positive outcome at the end.  “Too many succession plans get put on the shelf when things get difficult” says Mr Ahern.  “Family members need to clearly communicate with each other and be open to finding that ‘middle ground’. Recognising the needs and emotions of different generations will go a long way towards this”.

“In my experience, matters such as trading entities, wills, and property ownership can be more easily resolved if the family has addressed the emotional issues first.” These issues can include discussing how the parents feel about retiring and what role they want to have going forward, however the next generation also needs to ensure that they can work together with their siblings/extended family. “If the children haven’t addressed any underlying issues they have with each other or their parents, there is every chance the farming business will fail, regardless of what structures or legal documents are in place”, explains Mr Ahern.

Hand over ‘with a warm hand and not a cold hand’

One of Mr Ahern’s favourite sayings is to hand it over “With a warm hand and not a cold hand”, and whilst not every succession plan involves the transfer of farming assets, he says it is certainly a lot easier in the current environment with stamp duty exemptions and capital gains tax options available.  Furthermore, wills are commonly challenged so the transfer of assets as part of a well- documented succession plan rather than through the estate, can give certainty to family members.  Having the would-be testator still around to discuss with family members the reasons for his or her decision can also help with family relations.

Key tips to consider during succession planning

Based on his firm’s experience, Mr Ahern has a few key tips to consider during the succession planning process –

  1. People matter most.
  2. Start with broad goals and objectives and then narrow them down as the planning process evolves.
  3. Be flexible and work together.
  4. Consider the “what ifs” such as death and divorce, but concentrate on the “likely”.
  5. Be grateful and not entitled.
  6. Fair does not always mean equal.
  7. Review the plan at least every year.

Finally, Mr Ahern recommends having an independent facilitator involved in discussions with a role similar to a Board Chairman. “The Chairman’s role is to ensure the discussions remain business focussed and ensuring they are not carried out as parent/child conversations but as equals in business decision-making”.

If succession planning is an issue in your family, Mr Ahern’s advice is ‘to get some advice’, whether it be through him or your regular advisor.  And remember, it’s never too early to get started.

Posted in Blog, Business Improvement, Finance Tips, Tax Tips