The importance of farm succession planning
With Lucy Sherwood
Farm succession is a big issue - who will take over? What happens in the case of divorce, retirement, serious injury or death? It’s not a question that many of us want to think about too much, but it’s better to be prepared than not. For some farming families, it’s obvious what will happen if someone is now unable to work. One of the kids (or the only!) has a keen interest in farming and wants to continue on your legacy and then they seem like the obvious choice. But if you have more than one child that shows interest in the farm, what happens? And how do you legally plan out your wishes for your farm? How do you make sure you don’t disrupt business or negatively affect the family? We have some advice on how to formulate a plan and ensure the best future for your family.
The lay of the land
There are some 89,400 (ABS) agriculture businesses in Australia, and the vast majority of those are family owned and operated. Australia is home to an incredible 384 million hectares of agricultural land. The average age of a farmer operator in Australia was 58 in 2019, and these farmers are five times more likely to still be working after the age of 65. Due to the increasing age of famer operators and the fact that many work well into their mid sixties, succession planning is important for farming families for peace of mind, in case of unexpected issues.
It’s understandable that farmers tend to work longer - we all know the issues that farmers face that impact this. It's tough, relinquishing control of the business you've spent a lifetime building up. But if you are even thinking about this, then it’s time to take action and consider how succession will work for your farm.
Communication is key
It’s important to communicate with your potential successors often and set expectations for example if your three kids all grew up on the farm and love farm work, this doesn’t necessarily mean they want to be your successors- but you’ll only find that out through direct communication. It will help you to manage your expectations. It’s important at this step to understand one another and have an honest, balanced conversation about what you want for your heir(s) or successors and what they expect of you. It’s also a conversation that you’ll need to repeat often throughout the succession process, as circumstances and perspectives can change over time.
Division of assets
If there is more than one heir interested in the family farm, it’s important to consider how land and assets will be split between your heirs. Will they work together and split the business evenly? Who will take care of each aspect of your individual property?
It’s important to lean on the experts in this case and seek legal advice and even engage with an advisor on your business structure and what a viable succession plan might look like. Typically, you would include your accountant and lawyer. A common scenario would be to pass down other assets to one child, and the farm to another, or to have the successor purchase the land from your other heirs over time in order to have full ownership in the future. Another option would be to split the land, but this reduces the capabilities for farming each portion and can lead to non-farming heirs selling their portion, which could impact the long term viability of your farm. It’s important to make sure everyone is heard and understood at this stage, as it’s common for this issue to create tension amongst siblings if their wishes aren’t respected.
Alternative succession arrangements for farmers
Don’t have any interested kids or viable heirs in your family? Alternative arrangements are out there. If you want to retain your legacy and not just sell the farm, then you could consider an alternative arrangement that allows you to step back from the farm. Programs like this one by Cultivate Farms helps retiring farmers find a way to plan their succession and pass on the farm to an aspiring farming family that is just as passionate as you are, with multiple options for what stepping back might look like for you and your farm.
Passing on knowledge and information
Whoever is taking ownership of the farming operations needs to be properly briefed on all that you do and why, so that they can most effectively run the farm in your absence. Begin teaching them as early as you can, so that in the event that anything unexpected happens, you have a failsafe and can rely on them to take over. If you have Farm Livestock Management Software like Mobble, then you can work together on farm and have the complete farm history viewable between you, so they can access all the management information they need as a snapshot. Farm management tools are not only important for compliance, but also help to future-proof your business. As Thanda Mchunu says;
“Anyone can farm but not everyone can be a successful farmer. You’ve got to make sure you have the foundational knowledge to become a success.”