Times have changed and it’s less likely these days that a farm will automatically be inherited by a son.
With many farms being managed as businesses, succession planning is more comprehensive and needs to deal with matters other than a simple Will. These include the retirement plans of the older generation, managing complex family dynamics and relationships and the continuation of the business, as well as the need to cater for children who are not involved in the farming business and reward those who are.
As succession planning is so crucial for protecting the needs of both the family and the farming business, professional advice is required to put in place a unique and tailored succession planning solution, for your needs.
Dibbo’s top tips for a successful succession plan
#1 Start early
Starting early is the most important factor when it comes to succession planning. Implementing a succession plan is about being prepared for the unexpected and being ready to manage changing family dynamics or other impacts which may affect how the business is run. The earlier a family starts to develop a succession plan, with open communication and by setting clear goals and expectations, the more likely it will be successful.
#2 Begin with a review
Start with the end goal in mind. We recognise that in a family business it is sometimes hard to distinguish between business goals and personal goals as they become intertwined in the family business. With that in mind, we recommend a structured review to look at where your business is currently and to identify goals to help both the business and the family plan for the future.
Our reviews are like a blueprint to help you better manage your family and business affairs. Their comprehensive nature also means they are a powerful document which you can also use with financiers, accountants, financial advisers, solicitors, agronomists and other professional service providers.
#3 Seek professional advice
We are also able to act as an objective and independent facilitator, adept at opening up difficult conversations about wishes for your future and goals for the farming business. We have an understanding of the differing expectations and opinions often associated with different farming generations, so are able to expertly manage disputes and navigate all parties through the complexities associated with succession planning.
As your succession planning facilitator, we are also able to act as the central coordinator to bring together the aligned professionals who need to be involved in the estate planning process, such as lawyers, accountants and financiers, to create efficiencies and reach mutual understanding of your goals.
#4 Key considerations
Your succession planning should consider the following matters:
- Farming business management needs – including the transfer of management, responsibility, remuneration of family members working in the business and eventually ownership over time;
- Family legacy needs – including retirement plans for the older generation, aspirations and expectations of family members, the role/needs of extended family, and provisions for farming and non-farming children;
- Business structure considerations – understanding the advantages, disadvantages and tax implications for varying structures to meet the individual and sometimes changing needs of the business and inclusion of the younger generation;
- Legal implications for the family and business – including establishment of appropriate trusts for different assets (i.e. land holdings and SMSFs), and consideration of transferring individually owned (not jointly owned) assets and associated tax implications as well as creating a Will;
- Financial planning needs – understanding your current financial position and outlining long-term financial goals and retirement plans for family members, debt management plans, personal protection needs and estate planning wishes.
#5 Ongoing reviews
Lastly, a succession plan should be re-visited on a regular basis, especially if there are changes to family relationships or business operations, to make sure it still reflects your wishes and meets your needs. Regular reviews are an important tool to identify key areas within business performance which may impact on your overall long-term goals and therefore your succession plan. Regular reviews are about helping you to manage business risks so you are able to achieve future plans and goals.
Don’t wait until it’s too late
The importance of having a succession plan in place should never be underestimated for farming businesses, and it’s important to have a plan in place before a business crisis or change to the family occurs.
You should consider succession planning for your farming business and family BEFORE:
- The marriage of a family member;
- A family member has children;
- A family member begins working for the family business;
- A family member wishes to retire;
- Divorce or high levels of conflict exist within the family;
- A family member wishes to exit the family business;
- An illness of a family member.
Succession planning is all about risk management.
At Financial Services SA, we have a particular interest in developing and implementing practical and achievable succession plans. We help primary producers, business owners, families and individuals in rural and remote locations to plan now and for generations to come.
If you would like more information about succession planning for your family and business circumstances, I invite you to contact me today on 08 8253 2906 or email info@financialservicessa.com.au.
This advice is provided by Phillip Dibben under Financial Services SA rural business consulting services.
Phillip Dibben is an MFAA Approved Credit Adviser, including SMSF lending, and is an Authorised Credit Representative with Riverland Lending Services Pty Ltd, ABN 37 1415 814 080 ACL 391835, and is licensed to provide advice in all consumer and business loans including equipment finance. All loans are subject to lending and approval criteria.
Phillip Dibben is also a financial adviser at Active Financial Management. Active Financial Management and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306 trading as Fortnum Financial Advisers.
This information does not consider your personal circumstances (including taxation) and is of a general nature only. You should not act on the information provided without first obtaining advice specific to your circumstances.