It’s that time of year again, when transferring the farm to the next generation is on many farmers’ minds.
The Budget tends to convert many people’s thoughts into action.
A child may also be nearing the age of 35.
More farms are transferred in the latter few months of the year than any other time.
Transferring the family farm to the next generation is seldom an abrupt process.
The transition can even take place over a number of years.
The retiring generation has to be willing to hand over control of the business, and trust that the successor will do well.
The entering generation needs to establish a firm financial footing, as well as learning to manage the business.
The transition process must be well thought out and implemented prudently, given the potential financial consequences for all involved.
Before you put any pen to paper you should consider the transfer and its effects from all angles well in advance.
Are you ready to transfer? What about your financial security in retirement?
You should complete a projection of your anticipated income and living expenses during retirement for you and your spouse.
Do you have sufficient annual income to get you and your spouse through the retirement years?
Have you made provision for higher than normal medical expenses or long term health care expenses?
Should you leave the family home pass in your will or transfer it with the farm now?
The world is on the cusp of a staggering rise in the number of older people, and they will live longer than ever before. Over the next 20 years, the global population of those aged 65 or more will almost double.
Greater longevity may mean more years in retirement rather than years at work.
People are living longer and this requires more financial planning and consideration.
What is the financial position of the entering generation?
Consider the financial position of the entering generation.
Do they have some equity to put into the farm business?
Can they afford payments to you and creditors?
Is the farm already heavily in debt?
Will they have a business of sufficient size and efficiency to generate an adequate living?
Will they have to work off the farm also to generate a good standard of living?
What is your social welfare entitlements position?
Every individual is different regarding their Social Welfare entitlements position, contributions and status. Changes to the social contribution rules may affect your planned exit from the farm business.
Contact your local Department of Social Protection Office about your contributions and benefits before making any decisions about when to retire or how to sell or transfer the farm business assets.
Are you willing to let go?
Transferring assets and the management of the farm to someone else means you no longer will be in control of the farm business.
If you cannot let go, or cannot stand to see someone else in the decision-making role, do not retire, until you can accept this change in your role. After years of being the sole decision maker, or never having to consult with anyone, it can be difficult to hand over the reins to someone else. The successor may have a different style, management structure and vision for the future.
Are you emotionally ready to transition the farm?
If the farm had been the major focus of your whole life, and you have spent nearly every day building and working on the farm, expect some challenges.
Leaving the farm under these circumstances should be planned for well in advance.
Plan what you are going to do in retirement. It should be looked at as a new chapter in your life.
How is your health?
Successful retirees are usually committed to good physical and mental health. They eat right, exercise regularly and keep mentally fit by reading, thinking and conversing. They keep structure in their daily routine. Are you ready to do the same? Transferring your farm business to someone else can afford you the time to do the things you have always wanted to do. Take up new hobbies. Plan new challenges. Travel. Enjoy life.
John F. Kennedy once said, “Change is the law of life. And those who look only to the past or present are certain to miss the future.” This is certainly true of preparing for retirement.
© Irish Examiner Ltd. All rights reserved