By Sally Innis - Findex Albury
With hindsight’ is a powerful notion. With hindsight, I don’t know that I would have left it this long to start a conversation. With hindsight I would have encouraged my son off farm and not kept him here for so long. With hindsight I would have built more off farm wealth and not left it so late.
As accounting and business advisers, we often chat with clients. We chat about life, chat about the future and often reflect on the past. As a parent, I strive to guide the next generation, to help them become self-aware, to give them the opportunities I think I may not have had. But, does all this responsibility sit with us as parents? At what point can we be selfish and put our individual needs and objectives first?
As blunt as it may sound, the assets and income generated over a lifetime of hard work and commitment are not ‘up for grabs’ or available for ‘even distribution’. It’s the concept of ‘modern succession planning’ which seems to be a shared perspective of late. An expectation that family assets are divided equally, regardless if you are an on or off farm sibling. I agree there is a good case for equality of entitlement but does this come at a detriment when it results in carving up farms into small operations or on farm siblings walking away from farming altogether?
Succession and estate planning in a family farming business requires an understanding of needs, objectives and varying perspectives. It involves navigating family history, varying ages and life stages, valuable assets and, depending on the season, varying returns. It’s important to understand where the planning starts and stops and to define ‘financial succession planning’ versus ‘lifestyle succession planning’. Considering whether you’re juggling the wealth requirements for the future for everyone involved or future life plans for everyone in the family and how that sits with the family dynamic.
So where do we start? We start with Mum and Dad; we start with people. People matter most.
We get together and talk, openly and honestly, with Mum and Dad over a few or many meetings. What are your individual needs and objectives? Yes, individual. Mum and Dad can have different wants and needs. We map out our negotiables and non-negotiables, allowing time to reflect when different. From contentment, security, travel or how we feel about leaving our home on the farm. Maybe it’s peace within the family, with a hopeful heart that all members can work together to ensure Mum and Dad’s farming legacy is appreciated and fostered. The conversations are deep and real with no time limit.
I often find the most valuable meeting is when Mum and Dad share with their children a summary of what is important to them, what makes their heart sing and allows for a peaceful night’s sleep. The reaction to hearing from Mum and Dad often sets the tone of how the balance of the journey goes.
Time with each sibling is important, one on one time to listen to their perspective. In a safe and confidential environment, we can begin to understand what is important to them, what they may need to get off their chest, so to speak. These meetings are not numbers or process driven, just an opportunity to unpack thoughts and feelings.
It’s hard to understand until you live it, but to sell your farm and drive away… It’s hard, gut wrenchingly hard. The farm that surrounds your home, where childhood memories are made. The summer days of harvest and running along silage rolls, getting caught by Mum and having to patch up the holes you accidently made in the silage wrap. Begging Dad to keep the silage rolls away from the house because they stink, the hours in the tractor feeding Mum and Dad their lunch because farmers, well, they don’t stop. I guess when you love what you do, and your family is with you, what are you stopping for?
These moments and memories are strong. Whether you end up as an on or off farm child, the connection to the farm and home is real for both parties. The ability to talk about this openly as a family, to appreciate that everyone shares in this often helps with conversations about how we work together to align with Mum and Dad’s wants and needs with the family’s individual wants and needs.
These are powerful conversations that need to be had before moving onto finalising the succession and estate plan and working up any family agreements. The time taken to stop and acknowledge emotional responses is important.
Education is also key. Understanding future implications for on farm siblings can help all parties involved accept why the plans may land a certain way, and balance the needs and objectives of Mum and Dad. The concept of fair but not equal if often explored in this space.
Deciding where Mum and Dad’s future income stream is coming from, as well as eligibility for pensions or aged care needs in the future, are critical to work through and decide who bears this responsibility. If we have agreed as a family to keep the farm and wish it to be viable, a deeper understanding of the responsibility of on farm siblings can be appreciated.
A detailed succession and estate plan is a carefully crafted process of wealth planning, transitioning the control and ownership of the business, transitioning land, family agreements, capital gains tax and stamp duty considerations. This is a process, a clear and concise summary and an opportunity for all to stop and reflect, and for those impacted to seek their own financial advice.
With hindsight, we may change the choices we once made but the succession planning journey is born out of who we are and who we wish to be. The empowerment lies in all the lessons we have learnt along the way that we can share with the next generation. It is the people that matter most.