Rural
Is your Will your farm succession plan?
Unhappily, for many privately owned farming enterprises the preparation of their Wills becomes their only attempt to address family succession. According to recent research, less than 50% of farming enterprises have started to discuss succession, let alone prepared an effective plan.
We all know succession is a complex and emotive issue. It is too often considered easier to ignore than address. Yet it is becoming increasingly more of a critical issue for farming enterprises with the record numbers of baby boomers retiring, the growth in farm asset values and the rise in the number of relationship breakdowns. The easiest option, the preparation of a Will becomes the “default” option. The consequences can be heart breaking for families.
Case Study
David had left school early to support his father, Frank on the family farm. David saw an opportunity
to grow the farm business by acquiring a neighbouring farm so he could create a future for his family.
Frank refused to discuss David’s plans for the future and the family succession. David decided to
leave the farm to work in the mining industry and does not speak to his father anymore.
READ MORE
There are many barriers to effective farm succession planning and major stumbling blocks include:
» Parents finding it too difficult to let go of control;
» A changed focus of the ageing parents to asset protection rather than growth;
» A lack of planning and implementation of their children’s management and business skills
in the fast changing world of farming;
» Valuation disputes; and
» Difficulties in organising successor funding free of guarantees.
However, there is now good news for farming families. New online, acclaimed Materials, Tools and Programs researched and developed by Bstar, are educating farming families on how to more easily and consistently prepare for succession. For example, an important initial step is to assess your preparedness for succession by considering your answers to the following questions:
» Are you willing to eventually transfer control of the farm business?
» Have you determined when you will retire from active control of the farm business?
» Have you experienced a “succession event”, either positive or negative?
» Do you have any reservations about your potential successor and/or their spouse?
» Do you consider the family successor suitably qualified to manage the farm business?
After you have begun this self analysis, one of the more important next steps in preparing your farm succession plan is for you to complete a Farm Value Gap Analysis. A Farm Value Gap Analysis determines the gap between how much money is needed from the sale of the farming enterprise for you to live comfortably after retirement and the current value of the farming enterprise. Once a gap is identified, there is then the real opportunity to prepare a plan that closes the gap: including incentives for successors as part of the plan.
The sooner the family begins the Farm Value Gap Analysis process the happier the outcome is likely to be. To protect your family’s future, the future of your farming business and achieve peace of mind it really is time to discuss succession planning with your Bank, Financial Planner or Professional Adviser (Accountant, Lawyer etc). Alternatively, you can also use, either on your own or with your adviser Bstar’s award winning Materials, Tools and Programs to make succession planning so much easier for you and your family.
For more information please call Kelly & Co on 0800 25 0062.
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