AGRICULTURE NEWS - According to the University of Minnesota’s 2013 ‘Transferring the Farm’ series by Gary Hachfield, David Bau and C Holcomb, a successful succession plan ensures:
- The farm continues to operate with sufficient efficiency to ensure it can support multiple generations.
- Children are treated fairly, which may not mean they’re treated equally.
- The exiting generations and the incoming generations estate planning are in sync.
The process is a journey that will effectively guide an heir during a crisis and should be part of the farming operation’s business practice, and an agenda item for regular family meetings where, according to Hatchfield et al:
- Honest, open discussions on succession are encouraged.
- Concerns are addressed.
- Clarity is obtained.
- Direction is decided.
- Accountability is established.
- Milestones are measured
For the exiting generation, security of retirement is paramount, and the current generation has to balance a sustainable livelihood for themselves and the exiting generation.
The idea is to retire independently of the farming operation. However, the reality is the farming operation usually finances retirement.
Therefore, a succession plan needs to consider how the change will affect: access to capital; liability; management control; flexibility; continuity; taxation; and costs.
The right advisors are vital. Your advisory team should include your legal advisor, accountant, agricultural banker and investment, risk and insurance advisor. Independent unbiased opinions will prevent conflict while ensuring practical, smooth transitions.
Grooming your successors, starts with defining who ‘family’ are. Does this include blood relatives and/or in-laws? Not every family member will be interested in being in the family business; others will have particular skills that could enhance the business.
Once you’ve decided who to involve, draw up detailed job descriptions of key positions in the business. And draw up a short- and a long-term plan that includes a transition from one generation to the next.