I read with interest last week's Stock Journal article on Gillian Fennell and her new podcast, in which she intends to explore succession in the agricultural industry.
Succession and succession planning are interesting issues and something we deal with on a regular basis. There's a broad spectrum regarding how well it is dealt with, ranging from really well to situations where there are some serious issues and struggles to work through.
In my experience one of the main issues is a lack of discussion about the topic. Similar to discussions about someone's Will and what will happen when he or she passes away, succession is often treated as a taboo topic that shouldn't be spoken about.
Whilst there are understandable reasons for why people don't want to have these conversations, the reality is that it is better to address them properly, including setting appropriate expectations, before issues arise, so as to avoid simply kicking the proverbial can down the road.
One of the factors which is making these conversations more difficult now is the increasing value of farming land. This is particularly so where there are multiple family members who want to be on the farm and/or family members who don't want to be on the farm.
Where there's a mix of on-farm family members and off-farm family members, in the past it was typically easier to deal with this scenario as generally there were other assets outside of the farm, such as shares, which were close in value to the farming land and could ensure some level of equality between family members. This made it easier to provide for those who were on the farm and those who weren't.
However, with the significant increase in the value of farming land over the last 5-10 years there is a much greater difference between the value of the farming land and the value of other assets. The difficulty with this is how it can be dealt with, as it isn't usually as simple as going to the bank and borrowing enough to create equality between everyone involved.
Even in cases where there are no off-farm family members involved, it is still not necessarily an easy situation to navigate. The reason for this is that there remains a big issue, namely either having an arrangement in place which means the land is farmed jointly amongst the family members, or having enough land so that each family member can have a viable enterprise if the land is divided up.
All of this is without even touching on who does what on the farm, what people may have been promised along the way and what legal issues that may have created.
When succession planning is not handled well (and sometimes even when it is) it can have severe and negative consequences, including family breakdowns and spending tens, and sometimes hundreds, of thousands of dollars going to court to try to sort out any disputes.
The way to minimise being caught in a negative situation is to talk about the issues as early on in the piece as possible. This can often be assisted by having someone, usually a family advisor, assist with those family discussions.
This article was published on 18 April in the Stock Journal.
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