There is never going to be a right moment to think about this, but not thinking or talking about succession, can have serious consequences for your family and your farm’s future.
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Succession planning isn’t about retiring, there’s no evidence that the age of working farmers is falling, over 50% of farmers are over the age of 65 (NFU). However, understanding the evolution of a family business is important, particularly in a significant period of change.
Playing to your strengths and the strengths of your farming team, could see your farm grow and prosper. How many times, have you passed up an opportunity to diversify or try new things on farm because you didn’t have time to research it or had no access to the information or finance you needed? Working smarter doesn’t need to be working harder.
The government is funding the Future Farming Resilience Fund (FFRF) programme to help farmers review their farms so that farms are as productive and well run as they can be. As part of the scheme, you can get help to make a well-thought-out succession plan. Talking about the future of the farm, can help to head off arguments between siblings, who work on-farm and those who have chosen other careers. You may need to plan how your family can sustain farming, while dividing the farm amongst your children.
Change can be difficult, the first step is to identify where the issues lie and start a conversation.
Start by Thinking about You;-
How is your physical & mental health?
What are your key strengths?
Where about your lifestyle choices?
Do you want to play a less active role, but keep an interest in the farm management?
Do you want to keep an active role but step away from the stress of running the farm business.
Do you want to pass the farm on and step away from the business now, while remaining financially secure?
How can the assets to be owned in the short, medium and long-term?
Start Talking to the Family;-
If you intend to pass your farm on to the next generation, then making a plan will enable a smoother transition and play a part in securing the financial future of the business, which could give better access to credit for new infrastructure or further long-term planning.
Now start talking to your loved ones one by one, about what they want from the future.
What is their view of the longer-term direction of the farming business?
Where will each member of the family live?
What level of income does each member of the family want or need from the business?
What role would each family member like to play now and in the future?
What development, skills or experience do they need?
How will you provide for those who are not involved in the business?
Business Objectives of Succession
How will the business benefit from succession? Is there a better option?
Are the next generation sufficiently capable of running the business?
Are the older generation ready to retire?
Influence on time period for succession
How will the business look in 5 years’ time?
Transferring Assets
When a person dies without a Will, their assets are automatically divided up according to a government formula. Every item that the person owned has to be valued individually and accounted for tax purposes. The whole process can take months or some cases years and leave the farm in a crisis, in some cases sole bank accounts are frozen and assets held.
How can you pass on the farming business?
Allow some family members to purchase the farm once you reach retirement age. This enables a pathway of transition whereby there is relief on Taxation.
Family members involved in the farm can purchase the farm after your death. This way, they can take advantage of estate planning rules to eliminate the capital gains tax.
Splitting the farm up into individual pieces shared out equally. Including the right for specific family members to rent land from the other family members for their lifetime, to keep the whole farm together, stating the mechanism to establish rental rates in your estate plans and avoid future arguments.
Financial planning
Many farmers have pensions, it is estimated that 75% have a pension, savings or private investments, especially between the age of 55-64 (NFU). This means that the farm could potentially support a third generation while they are training into their role, if the eldest member of the family is there to guide them but farmers can reduce the income they need from the business long term providing an opportunity for investment in growth to make the farm more resilient.
Growing Family
It’s important that you regularly review your succession plan and ensure your plans and are keeping pace with any changes in your life, such as new grandchildren. Succession planning can be a positive process, staying in charge of the future and leading the family towards a sustainable and prosperous farm.