Succession planning is especially sensitive, but a vital issue for farmers. John Robson, a director at Robson & Liddle, discusses how to get started.
During first discussions with almost every new farming client, regardless of the meeting purpose, it is inevitable and essential that the conversation is turned to the senior family member’s intentions for the long-term future of the business.
As an adviser, I find myself asking for permission to delve into sensitive areas to help bring the succession planning process to the surface. It is rarely straightforward, and every situation is different.
Succession planning needs constant updating and is not something that once done, can be forgotten. Time marches on, values change, and people and relationships change, thus it needs to be under constant review.
Parents are often reluctant to hand over control of the farm they have nurtured and developed over a lifetime and the competing ambitions of grown up children make open and honest discussions difficult, particularly if this means placing one individual at the head of the business against the wishes of others.
That shouldn’t stop families from pushing forward and making difficult decisions. Failing to put a succession plan in place could threaten the future of the business as well as long-term relationships within the family.
When to broach the subject
The sooner a succession plan is in place, the better for everybody involved.
It is something that is ultimately in the control of the senior family members, but it is essential that no assumptions are made about the aspirations of the next generation. Untidy preparation will inevitably lead to conflict and ill feeling if dreaded events takeover.
Take the best advice you can at the early planning stage and making sure your advisers are fully appraised as to what you want to achieve.
A typical scenario is where a farmer has brought the eldest son into the partnership, the second child has a non-farming career and works away, and the daughter is married with her own family, but has an involvement in the farm on a day to day basis.
Make decisions clear from the start
Difficult decisions need to made as to whether or not the farm is to continue as a whole or be subdivided. To continue as a whole, it needs to be decided would the desired ownership structure be and how you would make appropriate provisions for the non-farming children.
Forward thinking, life insurances and sensible subdivision of the assets all need to play a part and the whole needs to be kept under constant review, particularly with the prospect of changes to inheritance tax provisions. It is very rare that a plan made ten years ago is fully functional today.
The best time to broach the subject is now.