The issue of succession – who will take over the farm when the current farmer retires or dies – is a massive one in the rural sector, with implications that can stretch a long way beyond the boundary fence.
For corporate-style farms, the handover can affect share flow. For individuals, there are tax implications.
Past approaches to succession
Succession can be an emotional issue for people who traditionally don’t do emotions very well. A lifetime spent on a farm builds a very deep connection and it can be difficult for someone so totally invested to step outside of that to examine the options objectively.
Historically, the expectation was that the eldest son would take over the farm. He usually wasn’t given a choice. Economics weren’t considered — he was simply told to “make it work”. Selling the farm was absolutely out of the question, no matter how financially unviable it was.
Given these pressures, it’s little wonder that inheriting the family farm was often viewed as a poisoned chalice, with sometimes tragic consequences.
The old ways no longer work. The children of today’s farmers are better educated, have more career options and are far less likely to commit to something they don’t want. This doesn’t make succession any easier for the retiring generation, however, and that’s why it’s important to come up with a long-term, early planning strategy. Consulting with someone independent can help take some of the emotion out of the process.
Succession considerations
- You may want your farm to stay in the family but does the next generation feel the same way? Talk about it sooner rather than later.
- Succession isn’t just about retirement. If you suddenly get ill, would you want to leave or stay? Would you have any choice?
- If you’re thinking of changing the farm’s direction (e.g. conversion to dairy), how will the ensuing debt levels affect succession planning?
- How would you handle more than one family member wanting to farm? Would you consider splitting the farm to accommodate them?
- Does the farm have to be bigger to make it work?
- If there’s a cash dilemma, would you borrow against the security of the asset or would you consider selling part of the farm to raise the funds? How would this affect succession planning?
- What are the succession implications if you’re committed to a particular farming style (e.g. organic) and the next generation wants to abandon that?
There are dozens of these scenarios and they don’t always involve fathers and sons. Daughters have brought court cases against their fathers because they have missed out, with the whole family being dragged into the dispute.
Succession is a vitally important issue and planning for it is always better served by involving an independent person to mediate between the various parties and their wants and needs.
Contact me today for an obligation-free chat to learn how I can help you facilitate a smooth transition from one farming generation to the next.