The poorest of farm succession and estate plans fall trapped to thinking everything will work out – somehow. However, by making no decisions or by promising the world on a handshake, these poor succession and estate plans inevitably shackle the next generation to each other with no means of independence. They can be a recipe for unnecessary family friction and have the potential to undermine the viability of the family’s farming business.
A well-considered farm succession and estate plan should cover your aspirations in life, retirement and death. It should understand your children’s needs and ambitions, with a greater view of ensuring that existing family relationships are fostered or rebuilt. Often, agreeing on your overall philosophy of what you hope to achieve from your farm succession and estate plan is the easy part. However, working out how to achieve that philosophy often requires getting the right people around the table who understand different ways in which that philosophy can be achieved.
We are often asked how to balance the ambitions of children who wish to continue with the family farming legacy with the ambitions of children who wish to pursue other vocations, particularly when the majority of the wealth is connected to the family farming business.
Here are some of our top tips:
- Avoid putting all your eggs into one basket. If all of your assets are tied up in your family farm business, then it can make it difficult to split those assets between your children who wish to continue your family farming legacy and your children who wish to pursue other opportunities. By building up off-farm assets and investments, you could minimise the effect of “splitting” your farming assets on the viability of your business.
- Don’t promise the world. A more prudent approach to involving your children in your farm business is to remunerate them rather than promising a “stake” in the farm business upon your retirement or death. Avoid compromising the security of your surviving spouse and the relationships between your children by complicating the division of your farm business. As we are also living longer, your children may require a more definitive income stream to support their own families.
- Measure expectations. There is nothing wrong with inviting your children’s opinions on your farm succession and estate planning. However, don’t fall foul by making any promises. While your farm succession and estate plans may have one eye on the present and one eye on the future, they should remain fluid.
- Equitable isn’t always equal. In an ideal world, your children would each receive an equal share in your farm business and estate. However, where an equal division would adversely affect the viability of your farm business, it is more important to divide your estate in a way that fairly recognises the viability of your farm business.
For all your Estate Planning needs including Farm Succession and Rural Estate Planning, contact the team at Aitken Lawyers today on 02 8987 0000.