It’s amazing how often client appointments for family farm succession discussions are cancelled.
There are always valid reasons that disguise the perception that discussions on farm succession are just too hard. Yes, succession discussions often take courage and difficult questions are asked. For some, financial reality is challenging, family relationships may be exposed, and so ‘later’ becomes a common thread.
Unfortunately, procrastinating with Succession and Estate Planning is the worst strategy as the issues, more often than not, never go away on their own. They usually grow and multiply and are eventually confronted under the most tragic circumstances, such as the death of a family member or a relationship breakdown.
Most accountants and succession planners have many horror stories where successful businesses have failed, loving family members become mortal enemies, logic and rational thought disappears, and occasionally, lawyers and the courts are left to determine the eventual disastrous outcome.
These same accountants and succession planners know that it all could have been so easily avoided. There are countless stories of harmonious success and positive outcomes. These are stories of the smooth transition of assets and control, open and transparent communication, rewarding retirements, independent decision-making, future generations carrying on the family farm and the control of one’s own destiny.
The first step is always the hardest.
The essential ingredients for a positive outcome are clear communication, a willingness to listen and understand others’ views and positions, compromise, determination and commitment to see it through combined with professional assistance, and a documented plan. The plan isn’t necessarily a constitution – it can be a dynamic and flexible roadmap that lays the foundation for where you want to get to, with a variety of pathways that we revisit many times along the journey. Everyone’s situation and journey is different. Everyone needs their own plan.
Often there are obstacles, roadblocks and speedbumps. These can be tax laws, stamp duty, capital gains tax, lending policies, legislative changes, children’s education, unfavourable seasons, as well as many personal or family misfortunes. This is where professional support and advice becomes vital.
A 2016 WA court case is an example of where a reliable and tax-effective Family Trust, as a multi-generational protector of business assets and flexible distributor of income, assets and control, is suddenly in doubt. It has taken some time for the full legal ramifications and understanding to filter through the professional ranks. The implications of the Mercanti case have resulted in a comprehensive review of many trust deeds, and often a significant change of direction is required in order to maintain that final succession destination. Regarding your own plan, make sure your adviser is across this.
So, make that farm succession appointment and commit to it. The usual response is one of relief, a clearer vision of the way ahead, an understanding and acceptance of financial reality and a commitment to talk things through with a renewed sense of purpose. The plan and journey may take many years, but it will be well worth it.
It is time to take that first step.
HOW CAN RSM HELP?
If you have any questions regarding succession planning, please get in touch with your local RSM expert.