Why succession planning is vital for the long term success of a farm

When considering the long-term prospects of your farm, succession planning is essential as it helps to provide a smooth transition following retirement, death, or incapacity of a partner of a farm business. It also helps to protect your assets and aids the continuity of a farming business.

Farm assets can be very varied, including everything from land to crops or livestock, machinery, and bank accounts.

When considering the long-term prospects of your farm, having a Will is a vital part of succession planning as it deals with who inherits the estate on your death. However, it is also important to protect the farm business and ensure it is able to continue on either the retirement or death of a partner.

Many farming partnerships are formed between family members and are not subject to any written agreement and they have continued this way for many years. Whilst this works for many farming partnerships, it can cause problems if a relationship breaks down, the business wishes to borrow money from a lending facility, or if a partner retires or dies.

It is important to be aware that family dynamics can change in many ways, whether it’s birth, death, marriage or divorce, these all affect the farm business so a written partnership can help protect the assets of the business in such instances. 

It is common for farming families to be reluctant to put a formal agreement in place, however, a partnership agreement clarifies the agreement between partners and minimises decisions being based upon assumptions and an individual’s understanding of a situation, which can cause conflict or confusion.

One of the major problems facing a partnership is when a partner dies as the bank may freeze the farming bank account. A written agreement can therefore assist in ensuring that the assets of the partnership are still available to the farm business in this instance.

A written agreement can also help avoid disputes and fallouts and can assist with tax planning minimising the tax which could be payable otherwise.