Farm succession differs from non-farm based estate planning in that the farm is the major asset. As such it needs to provide retirement income for the retiring generation, as well as employment and income for the younger generation. Parry Field Lawyers provide legal advice on a range of farming matters including farm succession planning.
Elements of a good succession plan
The starting point of any succession plan is to consider what the goals and aspirations are for each member of the family. These will include business, personal and financial goals. In planning for these goals you will need to consider the following issues:
- the possibility of keeping the farm in the family
- what age the older generation wish to retire – are they going to wind down slowly on the farm or retire to another property
- the desired level of retirement income
- is the younger generation ready to succeed and do they have the skills and commitment to run a farming business
- will the younger generation take on an acceptable debt burden and how will they pay out the other siblings
- fairness to non-successor siblings
- business structures – whether it will be a trading/family trust, sole trader, partnership, a limited liability company or a combination of two or more of these
- tax implications for all of the above
- the distinction between the farm operating as a business and the ownership of farm assets
Implementing the plan
Once the family goals have been developed and outcomes agreed, the next step is to seek professional advice regarding business structures and tax implications. Your lawyer and accountant should work closely together to discuss options with you in order to implement the best structure to enable your family to achieve their goals. The long term benefits achieved by restructuring correctly outweigh the short-term associated costs.
It is prudent to start early as it may take some time to put the structure in place and to transfer assets. The final structure must be able to adapt to changing needs.
Ensure the plan is revisited regularly, especially when there are new additions to the family, marriages or de facto relationships, or deaths. Make sure all family members have an up-to-date will. Enduring powers of attorney are also important to have in place, of which there are two types, a ‘property attorney’ and a ‘personal care and welfare attorney’. In both cases these are people who you trust to make decisions and act for you when you are unable to make decisions for yourself.
Throughout the whole process remember the key to success is careful, well informed consideration of all the issues, and effective and early communication with each other and your advisers.