Succession is rarely easy and with farms there’s the added complication of emotion.
Usually the farm isn’t just a business it is, or has been, home to the owners and their family.
To further complicate matters one or more of the offspring may have been working on the farm, making a contribution to it and increasing its worth, while others have not.
Then there’s a further complication if more than one of the children want to go farming if the property isn’t big enough for two or more.
If one or more get, or buy in to the farm at family rates, there is then a question of how to treat other siblings fairly.
Simply splitting the farm, or its value, by the number of offspring may give them an equal amount but it could cripple the business.
Another point to consider is what happens if one of the children gets the farm at family rates, then the property is subsequently sold? There is a case for putting a clause in the agreement which ensures that if the farm is sold, all siblings get a share of the capital gain.
Then there is also continuing income for the parents to consider and given that some succession plans still favour sons above daughters and mothers, this is of particular concern for women.
There have been some very sad cases where the farm has gone to the next generation and the widowed mother is left with little or no independent income. That shouldn’t happen now with the Matrimonial Property Act but if the farm was in a trust it still might.
If the farm is the parents’ they have the right to do what they will with it including staying on it or selling it and spending the proceeds.
However, most want to see a family member take over if s/he’s willing, and to ensure other family members get their fair share. There is no one way to get it right, but the stakes are high and getting it wrong can split families apart.
The best strategy is to start succession planning early, involve all the family and be open about figures and plans.
Regular family meetings are a necessary part of this. Held at least annually with an independent chair, it’s an opportunity to open the farm’s books and discuss plans for the future, both immediate and longer term, including when the parents are dead.
As one of our friends said, if children aren’t still friends after he and his wife have died, it will be the parents’ fault.
To quote another, you can’t always treat your family equally but you have a duty to treat them fairly.