Why Succession Planning Matters
Poor succession and estate plans can be a recipe for unnecessary family friction and have the potential to undermine the viability of the family’s farming business.
It is not safe to assume everything will work out – somehow. By making no decisions or by promising the world on a handshake, the future of the farming estate that you’ve put your life’s work into may be jeopardised.
A well-considered farm succession and estate plan should protect the future interests of your family and business partners. It should also understand your children’s needs and ambitions, with a greater view of ensuring that existing family relationships are fostered or rebuilt.
RURAL SUCCESSION
Rural succession planning involves having a living and dynamic plan which can change with circumstances. It must also be part of the overall business plan.
If all of your assets are tied up in your family farm business, then it can make it difficult to split those assets between your children. By building up off-farm assets and investments, you may be able to minimise the effect of ‘splitting’ your farming assets on the viability of your business.
WHAT HAPPENS TO THE FARM?
Deciding what happens to the farm when you retire can be tough. Equitable isn’t always equal. In an ideal world, your children would each receive an equal share in your farm business and estate. However, an equal division can adversely affect the viability of your farming business. Therefore, it can be more important to divide your estate in a way that fairly recognises the viability of your farm business.
A good farm succession plan should take into account the ambitions of children who wish to continue with the family farming legacy with the ambitions of children who wish to pursue other vocations, particularly when the majority of the wealth is connected to the family farming business.
TAX
A rural succession plan should include structures which minimise the effect of income tax, capital gains tax and stamp duty, not only on a year by year basis, but also on a ‘transactional’ basis when children are brought into ownership of part or all of the farming entities.
Planning for tax minimisation should be kept in perspective with the whole range of rural succession factors and events which must be planned for.
This fact sheet is for information only. It is recommended that you get legal advice about your situation.
