Farm succession planning is undeniably multifaceted.
Not only do you need to consider the needs and wants of the older or retiring generation, but also the younger generation farmer and their siblings – who are probably not all farming, yet will all need to be brought to the table.
In the mix is the legacy of an often long, multi-generational family history.
This often includes family members who may have challenging dynamics with emotional baggage and communication issues with other family members or a large asset with low or variable returns and expectations that may be unrealistic.
Over the years of advising succession planning clients, common questions often asked by the ‘retirees’ are:
- How will we finance our retirement?
- How do we allocate our assets fairly between farming and non-farming children?
- When should we hand over the farm to our child or children?
- How do we protect the farm from family law if a child has a relationship breakdown?
- How do we avoid a will being challenged?
To assist in addressing these questions and various others, a comprehensive succession plan needs to be developed.
However, a well-planned succession takes time – it needs hours of discussion, flexibility and compromise by all family members involved.
There are four fundamental areas that need to be considered to have a successful succession plan, and those who opt for a well-planned succession are those who enjoy greater benefits, both financially and personally.
- Review the current situation and understand the current business structure: the financial health of the business plus the needs and any special circumstance of the whole family group.
- The objectives or goals of each family member. This needs to be communicated to all family members within the group.
- Reach out to your advisers, as no one consultant or adviser will have expertise in all areas. For example, your accountant can provide the tax and accounting advice, but you will require a lawyer to assist in correct transfer duty and land transfers, wills, Enduring Power of Attorneys, financial planners in superannuation and financing retiring family members. The list goes on depending on the specific goals and needs of the family group.
- The final area to address and arguably the most important is the facilitator. This is often your accountant, your trusted adviser who not only knows, but already understands the family business from group family dynamics and is able to read the financial strength of your business.
This person is integral in organising the family group to work together, assisting them to communicate with each other to understand and achieve current and future agreed positions.
How can RSM help?
The final outcome should not be rushed, it should, however, commence in good time for all the family members to have a seat at the table.
A large portion of the family groups we have worked with have commented “they should have started this five years ago”.
So, consider commencing your discussion sooner rather than later and contact your local RSM accountant to engage in the succession planning process today.