Plan for your legacy Contact a Solicitor to Make a Will
Mixing business with pleasure is one thing. But mixing business with family is altogether different, and will often be volatile and dynamic.
While many family businesses collapse under the weight of high expectations, heavy politics and plenty of personal and professional baggage, many also prosper, due in part to extra steps they have taken such as talking through major issues before launching or implementing a succession plan to protect their business and personal relationships.
Disagreements among family members can spill from the professional to the personal, and vice versa. Problems can be particularly acute when parents and children are in business together.
A hostile family workplace is even more brutal, because people know exactly how to push each other’s buttons, and it can adversely affect the family and the farming business.
Implementing a successful succession plan involves more than minimising the tax payable. It will not be successful unless all members of the family understand and are included in the process.
Every family and farm transfer is unique. However, from working with farm families and farm transfers over the years, I have learned that there are common factors and advices applicable to all families. Here are ten basic tips for a successful succession plan, to ensure transition takes place smoothly.
* Start planning now. Do not rush the transfer of the farm, or your will. The earlier planning begins, the more options. Do prepare a legal will early.
Do not leave the transfer of the family farm until days before your child turns 35. Encourage your son or daughter to obtain the Teagasc Green Certificate as soon as possible. Do not procrastinate. Start talking and planning now.
* Communicate, communicate, communicate! You must discuss the succession plan with all family members. People tend not to feel aggrieved or disappointed, once they understand the reasons behind your decisions. Be open and transparent with all family members.
Do ensure good communication among family members about plans, strategies and issues. Explain why you have decided to leave the farm to John, divide the farm between John and Paul, or sell the farm and divide the proceeds between John, Paul and Mary.
* Decide on a date the succession plan will be implemented. This will give you a timeframe to work towards and measure your performance. Have you done what you said you would have done by this month?
Have you enquired about what social welfare entitlements you are entitled to? Have you instructed an engineer to prepare the map?
* Discuss tax implications with a tax consultant before you put pen to paper. Ensure you know how much it will cost you. The successor will also need time to find out how much it will cost him or her.
* If the family is in fear of a disagreement, and therefore takes no action, consider hiring a professional mediator experienced in farm transfers (such as Succession Ireland, based in Mallow, Co Cork).
If communication in the home and farmyard is poor or non-existent, everyone is suffering, including the business going forward. Mediation is confidential, non-judgemental, and impartial. A mediator will manage the process, only you and your family will determine the outcome.
* Make a list of all of your assets and debts, so your solicitor will have the full picture when you attend at the office to discuss the proposed transfer. It will also be easier to divide up your assets between children, once you have listed them all on paper.
* Determine the most important things, values and priorities for each individual family member, to help you decide what to do. It is a good starting point to ask each child to identify something from the family home which they would like to be theirs, after your lifetime.
* Address the issue of fair (equitable) versus equal division of the farm early in the process, especially if there are off-farm family members involved. Fair does not always mean equal, and equal does not always mean fair.
If John never went to college and stayed at home farming full-time, and the other children were educated and never farmed, then equal is not fair in that circumstance.
* Once you transfer the farm, you will no longer be the owner of such a valuable asset. Give yourself time to explore the options, and discuss the options with your solicitor, to ensure you are comfortable for the rest of your life after the transfer.
Do you keep a right of residence in the farmhouse for the rest of your life? Perhaps you do not wish to transfer the farmhouse now, and will leave it pass in your will? Do you require a right of maintenance out of the property?
* Do not assume that you know what others are thinking or how they feel about the process, or what they want to achieve from the succession plan.
Listen carefully and ask questions, if you do not understand. Get professionals to assist. For many farmers, it is a legacy of a lifetime.
See walshandpartners.ie/blog for more!