Phil Reed, head of rural services at Stephens Scown, discusses the tricky issue of succession.
One of the most difficult issues for modern farmers to manage is undoubtedly succession. Who takes over the farm and how, when the present farmer comes to retire, is an essential question for the long-term planning of the business.
However, recent research from Farmers Weekly and NFU Mutual found that less than half of farmers have a succession plan in place.
We jointly hosted a seminar on this recently – Your farm, your family, your future – and there was certainly plenty of lively discussion, underlining how topical an issue this has become.
One of the challenges is separating out the personal and the commercial in relation to the business. Who owns what, and how should it be arranged once one generation steps down and hands over to the next?
Economic conditions, of course, are quite tough enough at the moment in the farming industry. This makes protecting the farm from capital taxes on death or retirement even more crucial.
Clearly, there are many areas to consider: inheritance tax, provisions in the will, partnership agreements. One can also consider nuptial agreements – setting out what would happen in the event of a divorce in the family for example.
One of the most important things is simply to address the issue. It’s all too easy to put it off by saying that there is too much to do just to keep the farm running. But the issue won’t go away and the longer it is ignored, the harder it can become.
So if you haven’t yet thought about succession, the best time to start is now. It’s important to come together as a family and involve everyone in discussions. Communicate openly and honestly with each other. Each party should set out what they value most and what their aspirations are.
Get trusted professionals involved to facilitate and help the process along – one or more of your solicitor, accountant, agent.
This is a process that shouldn’t be rushed. Allow plenty of time for discussions and debate. But on the other hand, you’ve got to reach some decisions eventually so don’t let it drag on indefinitely.
Once decisions have been made, act upon them – and get clear legal documents drawn up setting those decisions out.
It can be a hard road. But once you’ve got there you’ll be pleased because, with the right agreements in place, you will have gone a long way towards safeguarding the future of your business and your family assets.
If you have a question or query for Phil Reed please call 01726 74433 or email firstname.lastname@example.org.