Tend to your own housekeeping
When considering the need and timing for commencement of the succession process, there is often something to be said for “tending to your own housekeeping”.
Every family situation comes with a mix of challenging interpersonal issues and business circumstances that have evolved over time and inevitably will require some thoughtful management in a business transition scenario. But the smart leaders of their families realise that it is best to be proactive and set about managing those difficult issues during their lifetime, rather than leave their family and their family business without direction, should the unexpected occur.
Family businesses can tend to develop structurally for any range of reasons, and it is not uncommon to see business structures determined purely from an efficient tax planning point of view. Accordingly, whilst those structures may work well for that purpose, they can end up with financial and legal implications that do not necessarily align with how family dynamics have evolved. Those business structures typically start out ensuring multiple family members are involved, but with the passage of time, that practical involvement may have come to an end or significantly changed. Individuals develop interests away from the farm, but they may still find themselves structurally, financially and even emotionally connected.
“People need to look at their current family dynamics and business structure and assume responsibility to avoid an unworkable ‘mess’ for successive generations. In assisting farming families looking for a pathway forward, we are prompted to ask what this interaction of family dynamics and structure means, what the implications are for the successors going forward, does it create unrealistic expectations and is there something that needs to be sorted out and dealt with whilst those family members best positioned to do so, are able to make those decisions” – Wayne Turner, Managing Partner
Appropriately this responsibility tends to fall at the feet of the older generation.
If tackled early they seize the opportunity to convey to all family members their reasoning for the essential decisions, impacting individual opportunity and equity, that may be perceived by others as unfavourable or unanticipated. At the same time, a proactive approach provides peace of mind and satisfaction, in knowing they are not ‘passing on’ an arrangement or expectation that hampers the ongoing business fortunes. These can be challenging family conversations but, by engaging in them early within a structured framework and allowing sufficient time for contemplation and digestion, a level of amicable understanding and acceptance is more likely achieved, than where individual family members or even a surviving spouse are left wondering.
“In relation to spouses and on a practical note, I think it can also be safely said that couples, in tandem, tend to deal with decisions that impact upon the future of their family, more effectively and with less stress than the individual alone. On their own and without emotional support, often succession decisions become more challenging with the remaining spouse left to continually reflect on ‘I think this is what he/she would have thought’!”
Do not leave planning for farm succession too late!
There is a lot of good to be achieved when it is taken on proactively and within a structured process. Having wholesome conversations that discover the objectives and desires of all involved and dealing with challenging decisions without delay makes the process, that future articles will seek to expand upon, much easier and rewarding for all.
By proactively planning for the handover of your farm business and related assets, contemplating the future needs of family group members, borrowings and appropriate entities, be prepared for the unexpected when it happens and gain certainty for the next generation wanting to take over the family business. Wayne Turner understands the difficulty in starting those conversations and can have you and your family turn those into a positive and constructive succession planning process. Call Wayne on 07 4669 9800.
Copyright 2020. Carrick Aland Rural and Small Business Specialists. Dalby, Toowoomba, Chinchilla QLD