Farming is a way of life, so it can be difficult to imagine handing over the reins, exiting from it altogether or selling a particular farming asset. For many, planning for rural farm succession doesn’t come easily, forcing you to think about the unexpected and plan ahead for what you want to happen. In this article, Gallie Miles rural farm succession experts Sue Garmonsway and Alex McIvor walk you through the rural farm succession process and share their top tips on having a robust rural succession plan.
Consider the ‘what ifs’
While you’re busy living your dayto-day of life, thinking about the unimaginable ‘what if’ scenarios of life can be difficult. Working through these is key to having a robust succession plan.
“In life, things can go wrong and the unexpected can crop up,” says Sue.
“A good succession plan requires consideration of all the ‘what ifs’ – death, separation, loss of capacity, family falling out, new in-laws becoming involved.”
“As part of our succession planning discussions, we encourage you to have those difficult conversations and workshop through all the ‘what ifs’ so that you can be clear about what you want to happen.”
“I’m like the pessimist in the equation. I come up with everything bad that could happen and derail the outcome they want and force people to think about those ‘what ifs’. They’re all relevant to the succession equation.”
Get everyone in the same room
Having a good professional team surrounding you helps you to map out your options and shape your plan.
“Ideally, your lawyer, accountant and banker are all together in the one room when the plan is being discussed and formulated,” says Alex.
“Each professional brings a slightly different perspective to the debate, which helps you to consider all avenues and options.”
“What I think of as a fantastic plan may have disastrous tax implications. What your accountant thinks will work might not be legally robust, and what your accountant and lawyer come up with, the bank might not finance,” adds Sue.
“It’s really important to have all those professionals involved at the outset to try to make a difficult process easier.”
Every plan is different
There is no one size fits all solution, or one single approach.
“It depends on the assets, outcomes and personalities involved,” says Sue.
“For the person leaving the farm, it’s about ‘how much do I still want to earn as a living,’ and for the ones coming in, it’s a question of ‘what can I afford to pay?’”
“Managing expectations can be hard and everyone’s perspectives need to be considered.”
It’s a commitment in time and energy
Alex says the process takes time to get it right, and it’s a commitment in both time and energy.
“It takes time and requires commitment from all parties,”says Alex.
“Some people take longer to get onto the same page or come around to a succession discussion, and emotions can run high at times. Some are happy to take risks, and others want to mitigate every risk possible and don’t care what it costs.”
Consider all structures
Good succession requires consideration of all of the structures available, says Sue.
“Each situation is different, and a company, a trust, or partnership may be appropriate,” she says.
“Trusts add an extra level of complexity and were often drafted for specific reasons at a given moment in time. But they are still a useful way to achieve succession,” she says.
“However the farming business is being operated, documentation also needs careful consideration, including Wills, Enduring Powers of Attorney, Shareholder Agreement and Partnership Agreement.”
At the end of the day, it’s about being thorough, seeking professional advice and having those difficult conversations to get everyone on the same page.
“The biggest thing we can’t stress enough is the need for a really well documented plan. A lawyer is crucial to that,” says Alex.
“When you look at the individual farm succession transactions in isolation, unless you have context, it’s really hard down the track to look into the reasons behind each decision made. Also if someone dies during the process, you need a legally enforceable document.”