Succession Planning for Farmers: Part One - To transfer or not to transfer – When is the right time?
As the saying goes, “if you fail to plan, then you plan to fail!” This too applies to succession planning for farmers. For all the baby boomers out there, your retirement plans and succession planning may be (or perhaps should be) already in order.
Some of you may have this on your “to do” list or in the “too hard basket”. There is much to consider and it is very often tricky to navigate all the options before coming up with the succession plan that is right for you.
We’ve had the pleasure of assisting many of our farming clients with their succession plans over the years and there is no “one size fits all”. Each succession plan is completely different, tailored to the needs, wants and desires of the particular family.
For those of you wanting (or needing) to make a start, here are some of the questions that you should ask yourself:
Who in your family is interested in being involved in the farm?
When do you want to transfer your farm to the next generation?
Do you want to hand it all over at once?
How do you manage everyone’s expectations?
What do you do with the debt owed on the farm? Will you still be responsible for it (partly or wholly)?
Where will you live? Do you plan on living in your farm house indefinitely?
Do your children want to move onto the farm? If so, can you sub-divide a house block for them?
What assets will you leave in your name?
How will you afford to live? Will you be eligible for the pension?
You are not alone in having to come up with these answers! Your accountant, solicitor and financial planner can assist you to create your succession plan, guiding and advising you on the options available to you.
This topic is very large so we won’t attempt to elaborate on the options available to all of the above questions here and propose to discuss these in more detail in the following issues.
Let’s make a start!
When do you want to transfer your farm to the next generation?
There are essentially two options in considering transferring your farm to the next generation:
To leave your farming business to the next generation in your Will. If you chose this option you will continue to run and operate the farming business yourself until you pass, when it will be transferred to your children as you have directed in your Will; or
To transition the farming business (in whole or part) during your life to your children that want to be involved in the farm where you can continue to offer guidance and continue to be involved in the farming business as much or as little as you wish.
There is no right or wrong answer here, however, it is important to consider the advantages and disadvantages to both options.
For example: If you leave your farming business to your children in your Will, an advantage is that you keep control of the farm. A disadvantage to this option is that as you get older, you may find it harder to continue to manage the farm by yourself.
Alternatively, if you begin the transition early, an advantage is that your children can take on some of the responsibilities that were once left for you to do, whilst learning how to manage the farm with your guidance. Disadvantages to this option are that you may lose control over the business decisions or leave your farm at risk of a potential claim if one of your children run into financial difficulty or marital issues.
As discussed above, there is no right or wrong answer and there are a large number of factors to consider. Once you are fully informed about all advantages and disadvantages you will be better placed to make an informed decision on which option best suits you and your family circumstances.
Next issue we’ll continue to explore answers to the above questions.
For those attending the Next Gen StepUp! 2018 Conference in Mackay on 26th to 28th March, you will hear more on this topic from Suzanne Brown (Director) and Misty Di-Filippo (Associate) from our rural property team. If you are interested in learning more on this topic, please register to attend this great conference. Details can be found at www.nextgenstepup.com
The content of this article is to provide a general guide on this topic. Professional advice should be sought about your specific circumstances.
For more information please contact our rural team.