Succession planning is critical for protecting the needs of your family and the farming business. If something goes wrong, you need to be able to make decisions that affect your future quickly.
In an ideal world, the earlier you start succession planning for your family farming business, the better. In reality, the day-to-day operations of your farming business may have taken priority, and the plans you had for the future five or six years ago have not been put into action.
So, what happens if you find yourself in a position where you need to urgently enact your plans for the future due to circumstances such as an illness, accident or marriage breakdown of a family member?
Our recommendations to help fast-track necessary succession planning include:
#1: Get help
You can’t do this on your own – it’s complex and personal involvement and emotion can stand in the way of decision making that will achieve the most appropriate outcomes. The unfortunate truth is that families who don’t plan well can unintentionally devalue their farming business as well as family relationships.
You will need professional advice including specialised financial planning, lending and legal counsel to help navigate the succession process. A team of professionals can act as knowledgeable but impartial sounding boards, and they are accustomed to opening up difficult conversations and managing conflict to maintain constructive and productive discussion. Their skill lies in getting results which consider the needs of all family members and the overarching long-term goals for the business.
#2: Articultate and prioritise needs – for everyone
A comprehensive succession plan should account for the personal needs of all parties, and articulate and prioritise immediate actions with consideration of:
- Farming business management needs including the transfer of management responsibility, remuneration of family members working in the business, and ownership over time.
- Family legacy needs including retirement plans for the retiring generation, aspirations and expectations of family members, the role/needs of extended family, and provisions for farming and non-farming children.
- Business structure considerations and 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 next generation.
- Legal implications for the family and business including establishment of appropriate trusts for different assets (such as land holdings and SMSFs), considerations and tax implications for transferring assets and creating a Will.
- Financial planning needs including understanding your current financial position and outlining long-term financial goals, retirement plans, debt management plans, personal protection needs and estate planning wishes.
#3: Done, but not dusted
Succession planning should 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 entwined 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 a powerful document which you can also use with financiers, accountants, financial advisers, solicitors, agronomist and other professional service providers).
Don’t forget your succession plan should be reviewed on a regular basis, especially if there are further changes to family relationships or business operations, to ensure 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 to help you better manage business risk.
We recently assisted a family to fast-track their succession planning when ill-health sped up the need for retirement planning. Using our mediation expertise, we hosted a series of meetings with all parties over a five to six hour period to understand family and business needs and articulate and agree on priorities. What was a vague plan six years ago is now a clear direction for the future of the business and family needs, which incorporated an express retirement plan, protection for all children and recognition of farming and non-farming children.
There’s no silver bullet when it comes to succession planning and every family and farming business will have different needs and priorities. 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 planning for your future, I invite you to contact me today on 08 8253 2906 or email firstname.lastname@example.org.
Philip Dibben is a highly qualified financial planner having achieved his Master of Financial Planning. Phil specialises in succession planning for farming families.
Succession Planning Case Studies:
Phillip Dibben is 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.