Not surprisingly there is no blueprint or one size fits all for farm succession planning. Every family has their own personal aspirations, goals and circumstances.
The first step in any plan is for the farming husband and wife to sit down and work out what they would like to achieve in the future and what they need to do to get there. Do they wish to retire and when? What do they want to do in their retirement? Do they want to travel? How much money will they need and what are their future investment strategies?
Once the husband and wife have been able to identify their retirement goals, consideration needs to be given next to how those goals can be achieved and what is to happen with the farm. Will it be sold? Is there a natural child successor? Is there more than one child successor? Can there be fairness to non-succeeding children? Every family is different and things often change at each stage in a family's life cycle.
It is not easy to begin this farm succession planning process and the chance of being fair to all children is becoming more and more difficult. It is imperative though that the husband and wife should not put the plan in the "too hard basket" at the early stages. All too often plans are put on hold as parents do not wish to confront the difficult issues but these issues are not going to go away so a disciplined approach is necessary. Get it down on paper as quickly as you can and revise and re-revise from there.
If there is going to be a plan to transfer the farm down to a succeeding child then it is vital that the plan will result in the parents being able to live comfortably in their retirement and possibly allowing for funds to be available to non-succeeding children whilst still being realistically affordable for the succeeding child. It is vital that the plan has a reasonably high chance of success so that there are no nasty surprises for any parties down the track.
Once a plan begins to develop then it will become necessary for the husband and wife to consult with their professional advisors; usually their lawyer, accountant and banker and sometimes farm advisor. Discussions will be held to consider the plan in general with a particular emphasis on determining the most appropriate farm owning structure for the plan and whether any farm ownership restructuring is necessary.
There are many different farm owning legal structures which all have their place such as partnerships, trusts and companies. In recent times a company/trust structure has been considered an excellent platform to enable a farm to be slowly transferred from the husband and wife to a succeeding child or children. This can provide a good opportunity to achieve fairness, especially where the plan has a long lead in time. This would normally involve the farm being owned by a company with all the shares being held by the family's family trust. Over time the family trust will sell shares in the land owning company to the succeeding child or children.
There are however many different improvisations which also work well and it is a case of considering the farm succession plan first and then working out the best farm structure to enable the plan to succeed.
So the message is to get started now and not put this difficult task on hold due to it being too much of a headache, it is not going to go away and the earlier you can make plans the better – even if the children are still at school.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.