Succession Planning for Farms

Have you thought about succession and the long-term plans for your family farm?

As agriculture makes up the highest concentration of family businesses passed through the generations, it is no surprise that succession is a key issue and is something farmers need to carefully consider.

Farm succession planning

When thinking of the next generation and passing on the business, succession only really succeeds optimally when it is prepared for. It is important succession planning is seen not necessarily about retirement but as a process of creating a long-term plan for the farming business, its goals and a plan of how to achieve them.

Succession planning, particularly in family farms, can be a difficult challenge involving multiple generations of farming families and a desire to avoid conflict, which is why we have published this article on succession planning tips for family farms.

Start the conversation early

In our experience it is never too early for families to start having discussions about succession. This isn’t easy as it is a very emotive subject, but it is absolutely essential for all sides to get the ball rolling and start this difficult conversation.

The older you become the more difficult and risky succession planning becomes, it also potentially limits the options available.

Define Roles and Responsibilities

Clearly defining roles and responsibilities for each family member involved in the farm operation is crucial. This includes not only day-to-day tasks but also leadership roles and decision-making authority. Clarity in roles helps minimise conflicts and ensures efficient operations.

Getting the tax right

While tax should perhaps not be the main driver for succession, there are some important tax considerations when thinking about succession planning for the farm business. These also have legal implications. In particular, the two key tax implications to consider are Inheritance Tax (IHT) and Capital Gains Tax (CGT). The tax aspects of succession planning can be complicated and, as tax laws continue to change, it is essential that you seek sound and proactive professional advice in this area.

Financial planning and protecting your family members

Pensions and investments can play an important part in succession and estate planning for the family farm.

For example, will you have enough provision to support family members and yourself after retirement? It is also extremely important to consider the impact of major life changes on the business. Birth, marriage, divorce or, in the worst scenario, death can all have a considerable effect on the family business, so it is essential to protect against potential damaging impacts as well as allowing for new opportunities. The need to have adequate financial security and protection in place cannot be overstated.

Again, it is essential you seek professional advice in this area.

Consider Non-Family Employees

While family succession is often preferred, it’s essential to consider the option of involving non-family employees in leadership positions if suitable successors within the family are unavailable or uninterested. Competent and dedicated employees can play a vital role in maintaining continuity of ownership and driving the farm’s success.

Plan for Retirement

Retirement planning for the current generation of farm owners is a critical component of succession planning. Ensure that adequate provisions are made to support their retirement lifestyle while also preserving the financial health of the farm for future generations.

Seek professional advice

As you can see above, seeking professional advice is very important when succession planning for the family farm.

Involving your accountant (and solicitor) at an early stage in the succession planning process means they can work together to help you identify options as well as potential pitfalls – including tax – to avoid.

How can we help?

As Hawsons have a team of dedicated agriculture accountants we are well-placed to work with your family, getting to understand your farming business and help you create an effective succession plan. Working closely with the experts from our in-house tax department and wealth management team, we can help you ensure that your succession plan is tax-efficient and takes into account all of your financial planning requirements.

If you are thinking about succession planning, please get in touch and book a free initial meeting with one of our experts using the form below.