Start thinking about succession planning sooner rather than later, writes Karen Walsh.
“Give me six hours to chop down a tree, and I will spend the first four sharpening the axe.”
For those thinking of transferring the family farm, the famous quote by Abraham Lincoln serves to highlight the importance of preparation.
Historically, farms passed to the successor, usually the eldest son, on the death of the farmer, with little or no planning.
Nowadays it is widely acknowledged that greater emphasis on planning for the handover of the family farm to the next generation is vital to ensuring future viability and sustainability.
Every family and farm transfer is unique.
However, from working with farm families in farm transfers over the years, I have learned that there are common factors and advices that are applicable to all families.
Here is my top ten of basic tips on how to implement a successful succession plan to ensure that the transition takes place smoothly.
There is a great deal to be done before you put pen to paper.
Start thinking about succession planning sooner rather than later.
Do not leave it too close to your son or daughter’s 35th birthday, the cut-off age for young trained farmer relief, or too late in the year, or when you are in poor health.
While you are deciding what to do, ensure you have a valid, up-to-date will in place, in the event of an unforeseen premature death.
If you do not make a will, your estate will pass according to the rules of intestacy, and the farm may pass to those you would never have intended to inherit it.
Speak with your accountant or tax consultant.
Consult your solicitor well in advance.
Make an appointment with your agricultural consultant, if necessary.
You will need to contact your bank, if the lands are mortgaged.
Farmers are self-employed, and they should check with the Department of Social Protection about PRSI contributions and the pension.
It is also very important for farmers’ wives who have worked on the farm to check their entitlements position.
An open conversation is required with all those involved, so misunderstandings can be avoided.
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.
Explain why you have decided to leave the farm to John; to divide the farm between John and Paul; or to sell the farm and divide the proceeds between John, Paul and Mary, for example.
Very often, once people understand the reasons behind your wishes and decisions. they accept and respect them.
Any assets, including the farm, which parents have transferred in the five-year period before entering in to a nursing home are included in the calculations for the assessment of assets and means of an individual.
Consequently, the only “safe” transfers are those where a clear five-year period has elapsed between the time of the transfer and the first application for state support.
This is a relatively new consideration for farmers when deciding whether to transfer land in their lifetime.
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 spoken yet with a tax consultant?
Parents may have different reasons for delaying the transfer of the farm to a son or daughter, and these reasons often revolve around concerns such as family farm income, security for the parents, and for other family members who still have to be provided for.
These concerns can be alleviated by the formation of a registered partnership between the parents and the son or daughter, as an interim step before considering a full farm transfer.
There are very considerable advantages to forming a partnership, for both the parents and the son or daughter.
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.
Encourage the proposed successor to obtain the Green Cert, sooner rather than later.
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.
One of the most difficult dilemmas many retiring farming families face is how to transfer the farm to a young son or daughter who is at home farming the land, while still being fair to the non-farming children.
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 would prefer to leave it pass in your will?
Do you require a right of maintenance out of the property?
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