Every farming business will inevitably, at some stage, consider succession and planning for the future. For many farming families and businesses, it can be the elephant in the room, and all too often creates unwanted tension and awkwardness. With the end to BPS monies on the horizon and other challenges to rural businesses, the need for such discussions has significantly increased.
We always encourage good communication between family members. It is important for the older generation, as well as younger members of the family, to openly express their views and perspective and discuss a succession plan, as well as considering new ideas with regard to the farming business. There are several ways in which farming families can approach succession planning.
Although succession planning takes many technical forms in respect of tax planning, business structures and Agricultural Tenancy Law, without addressing the fundamental basics of succession planning, all of the above become far more complicated to navigate. There are six key points, which address the challenges with regard to succession planning at a practical, family level. These points may seem relatively obvious, however many family farming businesses will be able to relate to some of the points raised. It is becoming increasingly important to look towards the future in terms of farm business planning, to ensure future viability of a farming business, which will ultimately require the younger generation, in order to achieve such objectives.
Number 1: The Younger Generation
If a younger member of the farming family wishes to become part of the future of the farming business, in order to learn and gain different experiences and formulate new and innovative ideas, they should be encouraged to leave the farm and work away for a period of time. After a period of gaining relevant experience and/or training elsewhere, the younger member of the family can potentially come back to the farm with the benefit of new ideas and knowledge and join the family business in a more involved role, to help to drive the business forward. Timing is key. If it is agreed that the younger family member is going to come back or take over the farming business, set a date and stick to it.
Number 2: The Older Generation
In order to take a step back from the business at the appropriate time, it needs to be clear what role the older generation will take in the business going forward. Will there still be an involvement? Furthermore, the following need to be considered:
Living Situation - Will the older generation be vacating the main farmhouse? If so, where will they live?
Pension or future financial needs from the business - Will there be a need to take an annual allowance from the business, or are there sufficient pension funds in place?
Nursing Care - Costs need to be considered for the future, as it could have significant impacts on the farming business.
Number 3: Communication is Key
Organising scheduled, regular farm and family business meetings to discuss everyone’s role, new ideas and address any issues which have arisen, is key to ensuring a positive progression for the future of the business and should be part of all farming family businesses. Everyone’s voice should be heard. An AGM is a good way to monitor business progress and discuss technical aspects, as the Land Agent, Accountant/Tax Advisor and Solicitor, as appropriate, could be invited to talk through elements of the business with the family and review the past year while looking ahead to help set future objectives.
Number 4: Privacy is Paramount
All too often, farming families fall out due to disagreements between various family members, and more often than not, it is a result of a lack of privacy between all parties. Quite often, when the older generation and the younger family members live in close proximity, due to the nature of many farm holdings, there are tendencies to intrude upon each other’s privacy, which over time can cause significant issues, particularly when the younger generation introduce new partners or spouses to the family. Accordingly, respecting privacy and space are key to keeping relationships positive between family members.
Number 5: Always make a Will
Making and keeping an up-to-date Will is a very important aspect of succession planning, yet so many farmers do not wish to, or have not made a Will. It is important to never assume anything and always seek professional advice if there is any uncertainty, with regard to making or amending a Will. You can change and update a Will at any time, and it is prudent to do so on a regular basis. If you have children under the age of 18, make sure you specify a guardian in the Will. If you are the Tenant under an Agricultural Holdings Act tenancy we would advise that you state in your Will who you wish to nominate as the Successor to your tenancy.
Number 6: Agent’s & Advisors
Good advice is important in helping farming families to make key decisions regarding the future of their business. Many farming families will have used the same Land Agent, Accountant/Tax Advisor and Solicitor for many years. It is important to ensure that those advisors communicate with all generations and family members, as appropriate. In the important discussions that need to take place, everyone should feel that their voice is heard and that their opinion counts.
Bletsoes have many years of experience assisting farming families to consider the future and helping to structure beneficial changes and progression. We pride ourselves on facilitating open and honest discussions between family members and helping to find solutions to difficulties. We have expertise in Succession to Agricultural tenancies and would be pleased to confidentially discuss situations that arise and explain how we can assist and advise. Please contact Nicola Clayton-Bailey or David Bletsoe on 01832 732241, if you wish to discuss succession planning in respect of your business.
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