Have you considered different pathways to the succession of your farm?
By Anne Marie Butler
While meeting recently with a group of Danish farmers, I was reminded of the stark differences in farming systems, structures, tax, financial supports and inheritance structures across different countries.
Under the Danish system of succession, the successor must buy the farm asset from his/her parents to 85% of market value. Obviously this leads to significant levels of debt on Danish farms which pass successively from generation to generation.
Organising a will
In its simplest terms, a valid will is a legal document where a person (testator) expresses their wishes as to how their property is to be distributed at death subject to certain rights of spouses/civil partners and children.
Dying without a valid will (known as intestate) results in your assets distributed according to the law on intestacy. This clearly can result in assets failing to pass to those you had intended.
Having open conversations with your family regarding the future of the family farm and associated assets is a powerful thing. For all parties to express their thoughts, concerns, ideas and wishes is a most worthwhile forum and in many cases can prevent future animosity, quarrels and uncertainty.
I have visited many farms where a known successor is already identified and the process of succession has already started while all parties are alive and well.
I have also met farmers where sons and daughters have openly chosen not to follow a career in farming and are gainfully employed elsewhere with the future of the farm somewhat yet unknown.
I have also met farmers where they retain full land and asset ownership and make all management decisions while their identified successor has yet to assume any responsibility.
Planning for the farm
Managing farms is a complex business. Farmers deal with weather challenges, husbandry concerns, technological advances, labour management and of course financial matters.
Agricultural structures have changed significantly in recent years with the advancement of farm partnerships, lease agreements, sharefarming structures, contract rearing and hybrid combinations of farm structures. Such advances have successfully facilitated the transfer of farms from one generation to the next.
As land and asset owners, it is imperative that tax planning advice is received if considering a new trading entity, the transfer of assets to another person or a planned move to a new trading structure.
‘Communication is key’
Planned and structured succession allows for a blend of experience and youth with valuable skills and ideas afforded by both generations. Communication is key. All parties must be honest, open and engaged and willing to discuss differences in opinion, experiences and vision.
If such discussions are difficult to initiate or progress, the presence of a trusted external party is recommended and will focus discussions while managing multiple expectations.
Honesty in discussions is vital. What is the vision of all parties? Who will take management decisions? Who has responsibility for financial decisions? What level of personal drawings/wages are expected from the farm? Will other family members/siblings receive a settlement payment?
Invariably disputes will arise. Tempers may flare and emotions are challenged. For the current farm owner, a feeling of loss of control and anxiety over future uncertainties may occur.
Simultaneously, a feeling of excitement regarding the renewed vigour of the farm, new plans and the continued development of the long standing farm business offers contentment and satisfaction. For the successor there may be feelings of excitement, enthusiasm, worry or apprehension.
With much to learn and equally much to offer, all parties to the succession process must take the time to listen, learn, share and discuss. Take the time to plan, bring an open mind to all discussions and respect the views of other interested parties.
Our Agri team are ready and available to meet with you, contact us on: [email protected].
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