With the back-to-school season in full swing and September marking the traditional start of the farming year, it’s an ideal time to reflect on a critical issue facing many farming families: succession planning.

Making plans for how your business may be passed onto future generations can be daunting due to its financial, tax, and legal complexities. However, these factors are only part of the equation. The foundation for a successful succession plan is actually laid much earlier than when assets are handed over, beginning in childhood and shaped by the everyday experiences children may have on the farm.

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Plant the seed early

Many families naturally involve their children in farm activities from a young age. Whether it’s feeding livestock, helping with the harvest, or simply spending time on the farm, these early experiences can have a more significant impact than it might seem. They teach practical skills, instil a deep understanding of the land, foster respect for hard work, and can strengthen your children’s connections with farming life.

The value of this informal preparation can often be underestimated. Yet, integrating children from the outset is as integral to succession planning as any formal legal arrangement. Through participation in day-to-day operations, children develop technical skills, problem-solving abilities, and a comprehensive understanding of farming’s challenges and rewards, making them better equipped to take over when the time comes – provided they wish to do so.

According to a recent report by the National Federation of Young Farmers Clubs, over 70% of respondents believed it would be difficult or even impossible for new entrants to break into the industry. This stark reality only highlights the importance of early succession planning and, as far as possible, retaining experienced hands within the family business.

Establish a safety net

The path to succession is not always straightforward. Changes in relationships, economic circumstances, or indeed personal choices can mean that farms are not always passed on to the next generation within a family.

In such cases, a well-thought-out succession plan is even more essential to ensure a smooth transition, whether to a new owner or through a different operational structure. This might involve adopting a new business model or selling the farm altogether. In these scenarios, a robust structure can help to mitigate potential conflicts and ensure that the farm’s legacy is preserved, even if it no longer remains in the family.

While informal preparation such as childhood experiences is invaluable, it should be complemented by a formal succession plan even for those who will be keeping it in the family. Despite this, fewer than 50% of farmers are estimated to have a formal plan in place, according to the Farm Advisory Service. This gap in housekeeping can pose significant risks. Without a clear, documented strategy, families may face legal disputes, financial difficulties, and emotional strain, particularly during unplanned transitions such as sudden illness or death.

A comprehensive succession plan typically consists of several key elements: identifying successors, defining their roles and responsibilities, outlining any necessary training, establishing legal and financial structures, planning for taxes, and setting up conflict resolution mechanisms.

To avoid these pitfalls, farmers should start planning early. This involves more than just engaging the next generation in farm life; it requires open and honest discussions with all family members about their roles, expectations, and aspirations for the farm. Although these conversations can be difficult, they are imperative for preventing misunderstandings and conflicts in the future. They can also help to identify potential successors and determine whether they have the desire, skills, and commitment to carry the farm forward. Discussions can help to set realistic expectations and can also pinpoint the need for any necessary training or education for future leaders.

Seek expert advice

Professional advice is another essential step. While many farmers may feel capable of handling succession planning independently, the legal and financial aspects can be intricate. Consulting experts – such as lawyers, accountants, or agricultural consultants – ensures that every component of the succession plan is thoroughly addressed and legally sound. These professionals can provide valuable insights into tax implications, estate planning, and other legal matters that may not be immediately apparent.

The benefits of early planning and seeking professional guidance cannot be underestimated, and Gilson Gray has in recent years established a dedicated Family Business Unit with a team of experts to support businesses in a range of sectors. Succession planning is not just about keeping the farm in the family, it’s about safeguarding the future of the farm itself, ensuring it remains viable and successful for generations to come.

As the new farming year begins and children return to school, consider the extent to which you are involving the next generation in the family farm. Beyond teaching them valuable and, often, transferrable skills, it is crucial to prepare them for the responsibilities they may one day inherit.

By initiating these conversations now, you can ensure that both formal and informal elements of succession planning are in place, paving the way for a seamless transition and ensuring the farm – and the family – continues to thrive well into the future.