Succession planning is an essential part of running a family farming business.
Effectively planning for the future allows you to protect your assets, safeguard your business, ensure continuity and provide for your family.
Succession planning in the farming industry is also vital to the sector’s viability as a whole.
In this article, our farming and agriculture specialist, Cara Watson, looks at some of the key things you need to consider when succession planning for your farming estate.
Farming Succession Planning Explained
Succession planning isn’t just about planning your retirement from the family farm. It’s about ensuring a smooth transition for those who run the business once you’ve stepped down, and whoever comes after. You are planning your business legacy, leaving behind your vision and goals for the continued success of the business.
Farming in the UK faces difficulty as a result of poor succession planning, an ageing workforce and very few new entrants to the sector.
Research conducted by Let’s Talk Succession showed that less than half of those interviewed had a succession plan in place.
It can be very difficult to pass on ownership of a business you have worked so hard on over the years. But in the long run not planning for succession only risks that business declining or the younger generation losing interest. Succession planning does not mean giving up your business, it means safeguarding its future.
Discussing The Future With Your Family
The first step in succession planning is discussing your plans with the next generation.
You should try to include everyone who might be affected in the discussions. It could be a good idea to bring in a specialist farming and agricultural adviser at this stage, who can help to explain the best way to move forward and set out all of your options clearly.
What Should Be Included In The Succession Plan?
There is lots to consider when it comes to what should be included in a comprehensive succession plan. Firstly, you will need to understand and set out the following:
- How the assets of the farm are owned
- How each member of the family wishes to benefit from the farm
- What parties are occupying the building and land on the farm and what the arrangements are
- The long-term plans and goals for the farm
- What each family member will do to run the farm in the short term and in the future
- A plan for mentoring or training the future generations, including how you will step back from running the operation
- Tax considerations
Who Will Own The Farm?
An important part of succession planning is making sure that ownership of the farm passes in the way you would like it to. You should ensure that all family members involved in the ownership or running of the farm have valid Wills in place to protect the family business.
Furthermore, you may wish to implement a partnership agreement or shareholder agreement. You should be mindful of matters such as marriage or divorce, and you may wish to consider prenuptial agreements to protect the business. This will ensure the business’s ownership ends up in the right hands at the right time.
Starting the process of succession planning can seem daunting but that is where experienced advisers come in. We can talk you through the process without legal jargon and make sure your business is secure for the future.
Cara Watson is a Director in our Private Client team and has a particular interest in and can add real value to individuals and families involved in farming and agriculture. Being married to a farmer, Cara combines her personal experience with years of advising other farming families on issues including estates and succession planning.
Posted on March 4, 2021