Farm Ireland

Sunday 21 January 2018

How to make a success of succession

Aisling Meehan

Transferring the farm business to the next generation is a complex and serious business. If not done properly it can cause serious financial and family strife.

Take a couple, Tom and Mary, now in their late 50s who have been farming all their lives. They have four adult children, only one of whom is interested in farming. Martin (33) has been working at home on the family farm since he left agricultural college. He is married to Sarah and they have one child and another on the way.

With all the talk of changes in the tax system, which are due to come in with the next Budget, and the announcement that their son and his wife are expecting their second child, Tom and Mary are considering transferring the family farm to Martin. All too often the legal and tax considerations are looked at and the most important consideration is forgotten about -- the practicalities of the transfer itself.

Before starting the transfer process, Tom and Mary should ask themselves the following:

1. Is the farm generating enough income to support themselves and their son and his family?

2. If not, are there viable off-farm or farm income expansion possibilities available to support their son and his family?

3. Is there a way to transfer the farm and keep everyone in the family happy?

4. Can the parents afford to transfer the farm and retain adequate security and income for the future? Will the parents retain the farmhouse or will they retain a right of residence and/or maintenance and/or a separate income from their son?

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5. Are the parents willing to transfer management skills and control to their son?

6. Have the parents and their son and wife had a positive, respectful and considerate attitude toward one another in the years before starting the transfer process?

7. Does the son have the desire and willingness to learn farm management skills?

8. Can the parents and the son and his wife communicate openly and freely?

9. Are housing facilities available that will provide acceptable yet independent lives for the parents and the son and wife? What about other family members -- will they be involved at weekends while staying in the family home? Will all the family participate in some sort of family conference leading to a mutually acceptable solution?

10. Are the parents and the son and his wife willing to be involved in decision-making on work, hours, vacations, finances and family expectations?

11. Is the son willing to start with a trial period of working with his parents through a wage agreement or farming independently while sharing resources for a year or two before a formal arrangement?

12. Are the parents willing to sell/transfer a portion of the farm to their son now and the remainder after a certain period of time so as to provide security for their son?

13. Are the parents willing to move to a residence off the farm to allow their son to be nearer the centre of farm operations?

14. Is the son prepared to pay his brothers and sisters some form of cash settlement and/or agree to the transfer of sites to them?

15. Is the son willing to take over any debts belonging to his parents?

16. Is the son willing to pay his parents adequately for work done after retirement?

17. Are the parents willing to pledge that they will not be domineering and will not try to control every aspect of their son's business and personal life?

18. Are the son and his wife willing to sacrifice standard of living and go the 'extra mile' with work to grow the farming business?

19. Do the son and his wife appreciate the farming opportunity given to them by his parents and are they willing to 'give and take' to make the transfer process successful?

20. Does the son wish to farm because he has prepared for it educationally, financially and emotionally and feels it is his chosen field rather than being pushed to take over the farm?

If the parents and the son and his wife can answer 'yes' to all these questions, they have a good chance for a successful transfer. If they answered 'no' to any question, this should be thrashed out before the transfer takes place. Bear in mind it is not always possible to achieve a complete and instant 'yes' answer to question three.

When you decide you want to transfer the farm, I would suggest you call a family meeting and discuss your intentions. If there is major disagreement I would suggest you involve a facilitator such as a highly respected neighbour or family friend or professional such as a solicitor or mediator with an agricultural background who will act as a middleman. I cannot over-stress the importance of discussing your succession plan with your family to prevent quarrels. Do not put off dealing with a succession plan -- start talking and planning for succession now.

The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, solicitor and tax consultant Aisling Meehan does not accept responsibility for errors or omissions howsoever arising . Aisling Meehan : 061 368412

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