HANDING OVER THE REINS

In Ireland, the tradition of farming runs deep in the veins of the countryside, embodying a heritage passed down through generations. Yet, amid this rich agricultural history, the challenge of farm succession can often lead to added stress and anxiety for all parties concerned.

Navigating this process has become increasingly complex and as the average age of Irish farmers continues to rise, many reach retirement age without a clear plan. Some people believe planning for farm succession means you are ready to “give up farming”. We know this isn’t true, and we know farm succession without a plan is a recipe for family conflict.

A delay in succession planning can pose risks to the continuity and productivity of many farms. Often, there's a lack of open dialogue within families about the future of the farm, leading to uncertainty and potential conflicts among heirs.

It can impact plans to expand holdings, upgrade facilities or change farming practices. Younger farmers can become frustrated with the old systems in place and the lack of security whilst owners can feel pressurised to hand over the asset, they have spent a lifetime in building and maintaining. There are so many possible pressure points which can erupt in disagreements between the sides. Any conversation about who will own the family farm has the potential to be difficult, but it’s a conversation that must happen.

RAISING THE SUBJECT

Outlined below are some key considerations and steps involved to assist people in understanding what is involved and most importantly how to get started. In many instances it is the initial ‘raising of the subject’ that can cause the most difficulty and once that bridge is crossed and all parties treat each other respectfully a good, clear, and defined plan can be arrived at.

The successful outcome of any succession process should meet the needs of all family members and ensure a viable and sustainable outcome for all parties involved.

1. Start Early:

Start succession planning early. Ideally, discussions about the future of the farm should begin years before the actual transfer is set to occur. The earlier you start, the better the outcome for yourself, your family and your farm.
Strive for fairness among family members. This doesn't necessarily mean equal distribution, but rather a fair and agreed-upon arrangement that considers the contributions of each family member.
Open and transparent communication is essential. Discussing plans and expectations with all family members helps avoid misunderstandings and conflicts.
Family meetings can be a useful forum for discussing the future of the farm.

2. Legal & Financial Planning:

Seek professional advice from Solicitors, Accountants, Valuers and Financial Planners who specialize in agricultural succession planning.
Don’t forget about the need for a sustainable income for both the retiring and the next generation.
The current owner can also transfer their current residence and retain a right of residency for their lifetime thereby giving them the security that may have caused some reluctance to procced with a transfer at the outset. They can also choose to exclude the house from the transfer if they so wish and retain some land or part of a yard. Everything is open to discussion.

3. Valuation:

It is important to know at the outset the value of the Asset which is the potential subject of a transfer. This involves retaining the advice of a suitably qualified Valuer who is familiar with agricultural assets and can provide you with a Market Valuation. This can include the entirety of a holding, subdivision options, houses, out farms and buildings.

4. Taxation:

Taxation in certain instances can present an obstacle to transferring the family farm and as such this is best addressed at the outset. The taxes that need to be considered are Income Tax, Capital Gains Tax, Capital Acquisition Tax and Stamp Duty.

5. Training & Education:

Ensure that the successor/successors are adequately trained and prepared to take on the responsibilities of running the farm.
Encourage ongoing education and skill development.

6. Farm Business Structure:

Consider the most suitable business structure for the farm, whether it's a sole trader, partnership, or company. The structure can have implications for taxation and liability.

7. Succession Grant:

A Succession Planning Grant was introduced to support farmers aged over 60 years (subject to criteria) and covers vouched legal, accounting, and advisory costs, excluding VAT to the value of €1,500.

8. Mediation:

In cases where there are disagreements among family members, consider using a mediator to help facilitate discussions and reach agreements.

9. Farm Successor Agreement:

Consider creating a formal agreement outlining the terms of the farm transfer. This can help avoid misunderstandings and provide a clear framework for the transition.

10. Review Periodically:

Succession plans should be flexible and subject to review. Periodically revisit and update the plan to accommodate changes in circumstances, family dynamics, or business conditions.

KEEP IT PROFESSIONAL
The above is by no means exhaustive but covers off some of the main points. Succession planning is a complex process, and each family farm is unique. The key advice is to start early, retain professionals who you trust to provide you with the legal, taxation and valuation information that is required to make a final decision.

THE CHALLENGE OF FARM SUCCESSION IN IRELAND