In the last week, I came across a Tweet on Twitter. It had been posted by a farmer in Australia – the location is somewhat irrelevant as the point he was raising applies equally here as it would there. He mentioned that he was thinking about his sons taking over the farm and was wondering how best to go about it.
Of course, there followed a very long thread as lots of people had many different ideas about how to allow the sons to be given an opportunity to run the farm whilst still allowing the parents to take an income from it.
The thread really got me thinking about this perennial problem for farming families. The farmer who had posted the Tweet mentioned that he had been given the opportunity to take over the farm from his father at a young age and was looking to do the same for his sons.
As I read through the replies, I noticed that he had posted his sons’ ages…the youngest was 3 and the oldest 13! Now it may seem that he is thinking about this far too soon; perhaps he is. Maybe the boys won’t want to farm and any planning that he does will need to be changed. That may be the case, but what was wonderful to see was that he was at least thinking about the possibility.
All too often we hear of, or speak with farmers who are the second generation. They may be in their 30s, 40s or even in their 50s and they haven’t yet been ‘given the reigns’ to the family business. Even worse, they may not know much about the running of the business or its finances as their parents retain full control and don’t allow them to be involved or to learn more.
Why is that? Sometimes it is just the nature of the older generation – they might like to be in control and know what is happening. More likely it is because there are difficult questions to be asked and even more difficult conversations to be had with members of the family.
Succession planning for a farming family business encompasses so many different areas – it will involve thinking about who will run the business in the future (maybe there isn’t anyone who wants to do that or perhaps there is more than one person with competing interests), what will happen in terms of land ownership, are there family members who are not involved in the business but need to be catered for in the future in terms of inheritance? The family will probably need to consider partnership matters and look at their respective Wills. What will happen if one of the younger generation passes away before the parents? Will their children and partner be protected?
The difficulty is that every farming family is different; every farm is different. There is no ‘one size fits all’ answer to the problem. What may work for one family may not be the best solution for another.
Every farming family needs to consider their own unique circumstances before making any decisions about the future of the farm. We always recommend that the family sits down and discusses the issues together. Of course, this may not be easy and as professionals working in the agricultural sector we know that this is often where the problems start.
Talking about the future will inevitably mean talking about people dying and that it never easy. If the family don’t feel that they can sit around the kitchen table to discuss the issues then they might feel better doing it in a more formal environment, such as the office of one of their professional advisers.
For planning to be a success it needs to be well thought out and that takes time. It is crucial to start the conversations early. Delaying the process may be detrimental to the younger generation. Doing nothing may cause more problems for the children and grandchildren of the family and may even land them with a large tax bill unnecessarily.
By involving the younger generation in the running of the business whilst the parents are still actively involved, there is more chance of them succeeding when the parents do eventually step down or pass away.
The outcome of the planning exercise may be that nothing needs to be done because the family already have their affairs in good order, but surely it is better to know that than to face great uncertainty in the future. Sometimes the right thing to do is to make changes during the lifetime of the older generation. For other families it might be better to deal with things through the Wills of the parents.
The only way to really know what is best for your family is to take advice. And our advice is to start the process as soon as you can. Effective planning can take many years to achieve and it is best to get started sooner rather than later to avoid missing out on effective planning methods.
The farmer who posted the Tweet must be commended for considering the future whilst his children are still so young. That said, perhaps Twitter isn’t the best forum for seeking advice about such an important topic. Hopefully, the replies have given him some food for thought but I hope that he is now consulting with his accountant, solicitor, land agent and bank to get the appropriate advice and to put the right structure and documents in place to allow the family farm to be handed over in an orderly fashion which works for all generations in the years to come.
Watch this space for details of our agriculture podcast where you can find out more about succession planning for farming businesses.