The family farm business is an icon of the Australian way of life. It was once the main source of national prosperity and remains the lifeblood of rural communities. However the family farm can also be a source of stress and heartache, especially when deciding who will take over when those currently in occupation and ownership retire.
Diversity among the businesses and personalities involved means no one-size-fits-all approach to farm succession planning can properly be applied. However, there are certain underlying principles that can make the process easier. To Ffind out more about farm succession planning with the wills and estates lawyers at Owen Hodge, read on.
What is succession planning in farming?
Farm succession planning is the process of setting up a strategy to ensure the continuation and success of the family farming business through future generations. The succession plan should incorporate a retirement plan, financial outcomes and the working arrangements for current and future family members.
How to prepare for farm succession planning
1. Consider your close and relevant relationships
People in relationships face at least three levels of expectations:
- Those that we know we have and talk about
- Those we know we have but haven’t discussed
- Some we don’t even know we have, until they are not met
How these expectations are managed has a strong bearing on the success of farm succession planning. Usually, the best way to manage the expectations of all parties is to have all relevant people consider their expectations, and then create an opportunity for open and honest discussion of the expectations.
2. Prepare for change
Everyone struggles with change at some level. In many respects, farmers experience and manage change often. Succession issues go to the heart of family relationships and are in a different basket to the many challenges usually faced on the farm. One change often experienced on the farm is when a son or daughter becomes part of the business, or a son marries and a daughter-in-law and children come on board.
Sometimes it is threatening when new family members enter the field. Their new energy, knowledge and ideas may be just what your farm business needs. But a new family unit working and living on the farm is a new dynamic. It is essential to find out their real expectations and negotiate how they can be incorporated into your vision for the future of your farm business.
3. Communicate to get the result you want
The way we often communicate can make it hard to address tough issues like succession. This is because:
- Talk tends to be understated and instead focuses on daily routines and tasks.
- Those who work and live within a family often make a lot of (frequently incorrect) assumptions.
- There may be underlying unknown or unstated jealousies or disappointments playing out.
- Many don’t recognise that a lot of communication is in what’s not said. Silence may not mean agreement, but just the opposite.
- Natural courtesy may lead to avoidance of hard questions, such as “Dad, when are you going to retire and give us a clear run?”. The younger generation may have less patience and hope things will sort themselves out.
So, when it comes to family farm succession planning, make sure you avoid these communication issues. Instead of only communicating about issues like death, divorce and succession planning when there’s a crisis or feelings are running high, it’s best to talk through these important topics now. Afterall, the highest goal in the family farm is to strengthen relationships, given that natural bonds are relied on for the success of the business today and through future generations.
4. Prepare early
Like any other form of planning, the earlier you start, the more options you will have. An early start will also give you time to call on the professional legal and accounting advice you need to achieve the best outcomes.
5. Be real about the money
Not surprisingly, the biggest difficulties with succession planning can arise when the available assets are not enough to fund all the family members.
As in other walks of life, the more money available, the more options there are. It is important that realistic expectations are provided because, if unmet, they can later lead to bitterness and a major breakdown in family relationships. This underlines the need to start planning sooner rather than later, so you have time to negotiate a solution that is as equitable as possible for all family members. Always consider involving a trusted advisor, like a business succession planning lawyer, in discussions. It may run counter to your preference for keeping such matters ‘all in the family’, but some experts have considerable skills in these matters and can assist to mediate solutions that give success to all interests.
6. Set a timeframe
A good and natural time to start succession planning may be when someone new enters the family, when the future is already on people’s minds. The best solution may be to stagger handing over control and ownership over time. This allows existing family members time to plan for their futures and transfer knowledge to those taking over. While the latter can use this lead time to find – and plug – any gaps in their farm management knowledge and skills. The goal date and process should be documented. Most importantly it gives certainty to those involved.
You also need time to get your plan right – anything from one to 10 years, depending on the complexity of your farming business. And remember to review the plan regularly as time passes, or whenever circumstances change. If you don’t already have a succession plan for your farm underway, now’s the time to start so you can avoid a crisis-driven handover that leaves nobody happy.
What not to do in farm succession planning
Now that we’ve walked you through how you can prepare for farm succession planning. There are some things that you shouldn’t do when executing your plan. These include:
- Relying on verbal agreements and conversations: Make sure everything is drawn up in writing, instead of just telling your family members what to do.
- Assuming your children know how to run everything. Make sure you have the plans and processes clearly stated in writing. This also goes to say, don’t assume they want to inherit your farm. Make sure you have come to an agreement first.
- Waiting until your retirement to start farm succession planning: To avoid any major issues, start planning your farm succession now.
Making a succession plan without the help of a professional: A professional, such as a lawyer, after all they are experts in estate planning. This can help to clearly outline all your plans and make sure everything is included.
Experienced business succession and estates lawyers
Owen Hodge Lawyers have a team of experienced estate and succession planning lawyers who can advise and assist you with your farm succession planning. Whether you need help preparing a succession plan from scratch or you need to simply update your existing plan, look no further. Contact Owen Hodge Lawyers on 1800 770 780 for any matter relating to your farm succession plan.
Be proactive with a plan.
- Pinpoint succession candidates.
- Let them know and explain the stages.
- Step up professional development efforts.
- Do a trial run of your succession plan.
- Integrate your succession plan into your hiring strategy
A succession plan is essential to ensure the next generation of farmers have clear plans and processes for the success of the business.
Creating a farm succession plan can take anywhere from 12 to 36 months, depending on the scope of the farm.