Any good farm succession plan starts with recognising there is a need to address how and when the business is passed on to the next generation.  Other considerations which complicate this process are providing an income for several generations whilst wanting to provide an inheritance to off-farm children.

No two succession plans are the same but there is often a desire to be fair to everyone involved.  Fair and equal are not necessarily the same things so it’s rarely assumed that this means an equal split of farm and personal assets to everyone.  In an ideal world, the farm would be large and profitable enough that it can be carved up and gifted to all the different off-farm children, with the on-farm son or daughter still able to run a viable business and support the income needs of the older generation.

How many families can afford to do that?  Even if this could be achieved, is it fair and would everyone be happy?

Control, not ownership

A common myth with farm succession planning is it’s all about deciding who owns the land or who will receive it via the parents’ will.  While these decisions do need to be made, it doesn’t address the main concerns of the next generation or their off-farm siblings.  For the farm successor, we have observed that they are more interested in control and security rather than who owns the land and machinery.

Control is about being the master of your own destiny and able to make your own decisions.  At the end of the day, farmers want to know the business they have dedicated their life to will continue to support their family in the future.  A parent’s desire is to see their children grow and live a better life than they could provide.  This is why the generation taking over is also keen to give their young children the opportunity to farm, regardless of who owns the land.

What about the off-farm children?

While there is often an understanding that the on-farm sibling (usually a male) gets the farm, the off-farm children at some point begin to wonder where they fit in.  This, in many ways, is where it gets awfully complex.  Some had a desire to come on the farm but understood the tough economic realities.  Some wanted to farm but were never afforded the opportunity.  Some have moved on and don’t expect much.  Others are bitter that their brother or sister will inherit the farm and they will be left with not much.

The point is there is no way to predict what people are thinking, feeling or assuming.  This is the sleeping giant which could cause problems later so it’s important to ask them.  It’s much better to get it out in the open and have these discussions while everyone is alive and able to explain themselves.

Finding out what each family member is thinking is difficult and it’s likely that they won’t be completely honest if you bring it up.  This is why it must be outsourced to someone independent, with no vested interest in the eventual outcome.

This is what succession planning is about – facilitating these conversations that lead to making decisions that everyone owns and understands.  Everyone is more likely to get on board if they feel they have been listened to.

Farm Succession PlanningNo doubt you would’ve heard the saying ‘if you fail to plan then you plan to fail.’ From our experience this is a true statement and applies to so many areas of our life.

This topic on succession planning is really about one generation exiting a business and the next generation taking over. Each family farming business eventually has to deal with this matter, either by choice or being forced to act after an unfortunate incident.

We’ve identified four main reasons for creating a succession plan:

In formulating a succession agreement, there are four main steps:

  1. Exit and retirement plan for the older generation leaving the business
  2. Transition plan for the next generation
  3. Decide / change ownership of assets
  4. Estate planning

It’s important that the process follows this order.

We met a person recently who provides rural skills training who said there is a scarcity of specialists who work in this field.  We know he is correct.  The reason, we think, is because it requires experience, empathy and common sense as much as technical ability. The process of succession involves transitioning different generations who often have different objectives and motivations.  This means there usually aren’t quick fixes or resolutions.

So what makes a good succession planner?

It’s advisable to use someone who is independent of the family, coordinates the process and calls on the services of the family accountant, lawyer, banker and even agronomist.  If they know and understand farming then that’s even better.

So when it comes to seeking expert succession planning advice, I’m pleased to say, we are one of those scarce specialists.  We’ve had over 25 years working with farming families in SA and have a particular focus on the Eyre Peninsula.

242 Glen Osmond Road, Fullarton SA 5063
Phone: (08) 8333 0790 | Fax: (08) 7200 2647

© 2019 Planning for Prosperity All Rights Reserved • General Advice WarningPrivacy PolicyFSG / Fee Insert • Site Map • Website by VERSION

This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. We strongly suggest that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances. You should read the PDS and consider whether the product/s is right for you. Past performance is not a reliable indicator of future performance.

Strategic Advice Solutions Pty Ltd (ABN 86 619 221 662) t/as Planning for Prosperity is a Corporate Authorised Representative
of Infocus Securities Australia Pty Ltd (ABN 47 097 797 049) AFSL and Australian Credit Licence No. 236523