Over the past 40 years, I’ve been working with rural families as they pass their farming business from one generation to the next. While there have always been some challenges, these days succession has become considerably more complicated mainly due to changing family dynamics, new technology, advancing farming practices and the need for what can be significant financial resources necessary for keeping it all going.
It’s meant everyone involved wants a seat at the table, which is great, but with so much at stake it can sometimes mean emotions ride high and that can create tension between family members. To find out how a qualified mediator (yours truly) can provide an informed, arms-length voice of reason that can guide your successful farm succession. Please read on…
For those who were born and raised on the family farm and worked it their entire life, letting go of it isn’t easy. Despite the years of droughts, floods, fires, good seasons and bad, when the time comes to retire there is a lot to consider when passing the reins to someone else.
It’s never lost on me, just how emotional that sort of change can be, and it’s shaped my approach to farming business succession.
I’ve spent the last 40 years working in agri-business, finance and financial planning. I’m experienced and formally qualified to consult in each of these areas and recently I added Accredited National Mediator to my list of credentials.
Even though I already had extensive knowledge of farming, and I was often involved in guiding farm succession discussions, I knew formal training in mediation would provide additional skills and knowledge that would help farming families achieve their succession goals sooner.
So here I am, fully qualified but unlike many new mediators I’ve got a lifetime of relevant farming experience behind me.
There are dozens of small issues that need to be addressed, but in my experience, there are five big discussion matters when it comes to farming business succession.
1: Farming business management needs
Perhaps the most involved in a practical sense, this discussion should consider the transfer of management, chain of responsibility, remuneration of family members working in the business and the eventual ownership when the time is right.
2: Family legacy needs
This is among the more emotional discussions as retirement plans for the older generation need to be discussed and these need to include the aspirations and expectations of not just of the retiring family members but the entire family. The ongoing farm legacy must always consider fairness and address the roles and needs individuals of immediate and extended family members and consider provisions for farming and non-farming children. Fair does not always mean equal. Fairness factors in the likes of “sweat equity” to account for input over the years which hasn’t been paid in full, or extra benefits provided along the way in lieu of an interest in the farm.
3: Business structure considerations
Another practical discussion that is often complex by nature as structuring the future of the farming business must be completely understood by all involved. Different legal and tax structures have advantages, disadvantages and tax implications that must be considered as a whole and in terms of impacts on different individuals. Structures also require a certain amount of flexibility in anticipation of future changing needs of the business and inclusion of future, younger generations.
4: Legal and tax implications for the family and business
There are of course a raft of legal requirements and these will include establishing appropriate trusts for different assets (i.e. land holdings and SMSFs) and transferring individually owned (not jointly owned) assets and associated tax implications. Individuals will also need to consider creating their Will as well as a comprehensive estate plan or family agreement for those business assets that fall outside a Will.
5: Financial planning needs
Each family member should take steps to understand their current financial position and outline their long-term financial goals and retirement plans. As part of this, debt management and personal insurance should also be considered and as mentioned above, get your Will and estate planning in order.
As you can imagine, each of these five matters will likely branch into numerous other and aligned projects that must all be considered.
With so much to discuss, it’s important to begin farm succession well in advance of the current farm owner’s retirement and to accept not everyone is going to see eye to eye all the time.
Disagreements should be expected but it’s important to focus on productive discussion, rather than allowing emotions to go unchecked to become destructive to relationships and the overall process of succession.
Mediation can be a valuable tool in your farm succession process. Its purpose is to guide and move discussion towards win-win outcomes or as close as possible for all involved when things reach a stalemate.
Ideally, farm succession mediation should be voluntarily.
The alternative is court ordered mediation, which occurs when there is a dispute or conflict that has not been resolved through direct negotiation, with or without lawyers.
As a mediator, I often provide perspective when those close to situations simply can’t.
Mediators achieve win-win outcomes by ensuring everyone has a voice at the table, finding common ground between all parties by identifying shared goals and values; and helping all involved to agree on actions that will ultimately result in creating a clear path to resolving disputes and achieving outcomes.
There are many different issues affecting farm business succession, not least multiple generations with different personality types, goals and aspirations. Mediation is not about taking one side over the other, but providing an arms-length, impartial and insightful position that allows those involved to reach their own resolution.
Introducing a mediator early in the process, and then calling them back as required to identify and dismantle roadblocks can keep farm succession moving forward and achieve fair and timely farm succession outcomes.
To find out more about farm succession and the value of mediation in the succession process, please contact Dibbo at Phil Dibben Mediation me on 0438 946 636.
What to expect during mediation