How to take the anxiety out of farm succession planning
How to take the anxiety out of farm succession
22 July 2014
Many farmers put succession planning into the too hard basket because of rising capital values, but it’s a crucial process that will be a lot less fraught with danger if family members are involved in the process, says Neil McAra, Crowe Horwath’s Managing Principal - Southland.
“It’s never too early to start planning for retirement and farm succession,” said Mr McAra, who noted that one key to a successful plan was distinguishing between reward for services provided by family members and the risk/reward for ownership/investment in the business.
Another key element was for the farm
owners to ensure they had considered whether they would have
an ongoing role in the business, and define what that role
“To alleviate the possibility of things getting off track, it is important to ensure that owners adequately plan for the future of the farm and the people within it, so that all runs smoothly and they can enjoy the transition process.”
The key considerations include:
The plan must ensure the family remains a family
The retiring generation must have an inflation-proofed and guaranteed income
The succeeding family must have a reasonable chance of having a profitable business with an ongoing business on final settlement
There must be a plan for non-succeeding family/ family members
Passing assets and/or control of operations to the next generation either on retirement or death
“There’s no one size fits all solution,” said Mr McAra. “The degree of involvement and timing of input by family members will vary from case to case. But the succession plan should ultimately be understood and agreed on by all family members.”
However, the degree of involvement and timing of input by family members would vary from case to case, he said.
Mr McAra noted that there were many technical considerations involved in setting down a succession plan that should be discussed with an accountant and legal adviser, working together.
The technical areas included matters such as legal ownership, trusts, companies, and the tax impact of transferring the different assets, including buildings and livestock.
“Every farm and family is different so you need to
involve the right people early on,” he said. “A team
approach will bring the best results.”