Farm succession – keeping it in the family
Making sure the family farm stays in the family might seem pretty straight forward. But there are a number of complex issues that can arise, and family disputes are almost inevitable if the process of transferring the farm to the next generation is not handled with care. Keeping everyone happy can be tough.
Consider this; the parents of adult children own and operate a farm which has been in their family for generations. Of their four children, only one has stayed to work on the farm, which he has now done for ten years, on a minimal salary. The parents are now approaching retirement. They want to continue living on the farm, and continue having input in any farm decisions.
They also need to think about what they will live on during their retirement. If they transfer ownership of the farm to their children, how do they strike the best balance for themselves, the son who has worked hard on the farm, and the children who have not?
Does the farm earn enough income to support two generations living there? Are there debts?
Farm succession planning helps to resolve these issues. It’s not easy. But it is a process that allows everyone to have complete clarity about the ownership and operation of the family farm. It removes the uncertainty.
Planning for the transfer of a farm before your hand is forced, such as the death of a parent, is important. Unlike a will, which can be disputed, a written farm succession plan means things are clear to everyone from an early stage.
The idea is that all relevant family members sit down and plan for the future. They consider issues like the value of the property, its income and debts, retirement plans, whether any children work on the farm, and their future plans. A succession plan is then devised based on that family’s unique situation. For example, a ten year plan may slowly give ownership to the children, with a larger stake going to the son working on the farm.
A lawyer specialising in wealth protection will be able to give advice on ways to transfer the farm to the children without attracting stamp duty.
Failing to plan ahead could mean having to sell when times get tough. With produce prices currently going down, there is real financial pressure for families reliant on the farm’s income to service its debts. And while selling in today’s healthy property market may remove debt, and even result in a large financial gain, losing a farm that has been in the family for generations can be devastating.
As there is no one-size-fits-all plan – getting expert advice is important.