Farm Table says:
This presentation for ProAdvice’s Andrew Beattie provides a practical framework for succession and include tips on do’s and don’ts for the process.
Beattie begins by stating the reasons why a family farming business adds to the already complex nature of succession planning. These include:
- The emotional nature of family connections and the associated difficulty in having conversations about these difficult subjects.
- Often only some of the next generation will be involved in the future running of the business and others children are not.
- There are varying needs and wants of the “retiring” generation as compared to the new farmer(s) and their partners;
- There is often a long multi-generational family history of the land and business in question.
- The farm is a large tangible asset with a value that is independent of the operational return of the business. The business return on the asset value is generally low and variable (relative to other investments).
Next, Beattie outlines what has typically been the stereotypical farm succession process.
- The oldest (or strongest) son took over the family farm or family estate.
- If possible other sons who wished to farm were helped to get established in other farming regions being “opened up”.
- Daughters where left smaller “tokens” of the family wealth.
Today, this is changing towards an expectation of equality. Now, there are two key competing factors at play:
- Modern estate planning is leading to smaller farms, or farms with heavy debt burdens, via division of assets or sale of the farm because “fair” division is not possible; and
- The scale required for a viable operation is increasing.
Beattie also draws on a case study from the early 2000s concerning 4th generation farming family with two children. It follows their story through a succession planning meeting, their meeting minutes and what happens post-meeting. However, eight years later a lot has happened in between including tough times, farm development, debt reduction, off-farm real estate, stock market crashes etc. After a number of events, there was a serious dispute with the non-farming child.
Click on the link below to read more about this case study.