In some families this is a very difficult topic; in an ideal world succession will be a subject freely and openly discussed. However, invariably life is more complicated than that. Different members of the family have different expectations and these can only be managed if they are out in the open.
Sometimes problems are not as enormous as maybe the parents envisaged as their children have made pragmatic decisions to be self-supporting. The difficulties arise when more than one generation is reliant on the farm, and maybe more than one child has an interest in using the family property as a base, or they are all involved in the same business.
Farmer’s children are fortunate as if they have aspirations to go into business they often can use the home farm as a base to start from. In the lead up to career choices the economics of farming need to be clearly discussed; will a child coming home release the parent(s) to go and find income outside the farm (may be on a part time basis), or will the child be able to start up a business from home, with support from their business minded parents, space for storage of goods/materials/ a workshop, maybe to a world-wide market place using the internet. This is a huge advantage over an urban child with no resources except perhaps a garage or a back bedroom.
If round the table discussions are possible it saves a great deal of anxiety for all concerned. Involving someone from outside the family and having a clear agenda for your first few meetings may get ideas kick started and ensure the sensitive/ difficult subjects are aired.
Small scale dairying which involved the parents and their son was no longer viable. The unit, without the regular income from milk, would no longer support all 3 of them. The parents were past retirement age and wanted to spend less time having to do farm work. Plans had been kicked around the family but no decisions were reached. After a broad ranging discussion with their accountant a course of action was agreed. The plan was to stop milking and simplify the activities so the tasks could be managed by the son with father willing to help on an ad hoc basis as required. The son would look to utilise his machinery skills by obtaining a “ticket” to drive site vehicles and so provide him with additional off farm income.
The farm would provide them with a place to live, and they would invest in the buildings with a view to obtaining a variety of rental streams. If at a later date the son wanted to return to full time farming, or start another land based business this was still a possibility.
Depending on location and resources, farms can be the centre of a great variety of income streams, the options are limited firstly by drive and enthusiasm, secondly by capital. However, you don’t have to look far to see examples of determined individuals who have made successful businesses from very inauspicious beginnings.
Succession is not all about tax, although the discussions can lead on to inheritance tax and capital gains tax planning. A more immediately rewarding outcome is stability and a secure future for the people involved.
If you would like help with getting your succession plans in place please contact us.