The benefits of taking the time now to plan for the future
By Bill Thompson – Solicitor-Director, Succession Planning
30 September 2016
One of the biggest risks to the family farm or small business long-term viability is not drought or interest rates, but lack of planning.
When you mention succession (or progression) planning, many people associate it with big business and the issue of who’ll replace the top executives if they retire or leave the firm. However, the issue can be just as important for smaller businesses and farming operations.
Here at Commins Hendriks, we have an experienced team of solicitors and support staff who work with farming and small business families to formulate a strategy that enables a smooth transition with a minimum amount of disruption to the operation.
The initial steps focus on determining what future planning might already be in place, the current business structure and ownership of the assets, a retirement plan for the older generation with their participation and consultation, and what options might be practical and workable for all parties going forward.
These options can range from selling or restructuring the business, or entering a Joint Venture arrangement, to transferring some farmlands subject to the parents having security and a guaranteed income, or an early inheritance for the non-farmers.
There are some rules of thumb we encourage you to consider for succession planning:
Inheritance – it’s good luck rather than a right
Fairness rather than equality
Security – for the parents and a future for the farmer child/children
Equal opportunity – farmers and small business operators are both male and female
Process – need to consult all parties
No one solution fits all – each succession plan is different
It’s also vital to have an up-to-date Will.
We have seen cases where viable farms and small business have been sold because the parents had not updated their Wills or the Will provided that the farm or non-farm business and the related assets were left equally to all the children and did not recognise the contribution by a child or children towards the operation of the business.
We generally recommend that a copy of the draft Will or a summary of the Will be distributed to all family members so there’s an opportunity to resolve any potential disputes while the parent are still alive.
If you’re at the stage where you’re thinking about developing a Succession Plan, contact Commins Hendriks to start the process.
We have a Succession (Progression) Kit to help you put together information on your family tree, assets and liabilities, a mud map of the farm, a summary of the trading entity or entities from the accountant Trading Entity or Entities from the Accountant. It also includes a questionnaire for parents and children.
Once that information’s gathered, a meeting can be organised with the parents initially or the whole family, including children and their spouses who are involved in the farming or small business operation, to review the family tree the assets and liabilities and the family questionnaires.
We can work together with you and your advisors, accountant, financial planners and aged care providers to provide a comprehensive plan and ensure that appropriate documentation is put in place to implement your plan.
We road test your Will and progression plan with your accountant and financial advisor by asking “is the plan practical and workable?”
For more details and assistance, please contact us on 1800 643 779.