Many third generation farmers fail, and this is often the result of a lack of succession planning.
Historically, the oldest son was left the bulk of the estate with the other male children being expected to have built themselves careers that could provide a base support. Unfortunately the daughters were lucky to receive a modest allowance or cash settlement as they were expected to be married and have their husbands supporting them. Typically the family were informed of their share at the “reading of the Will”.
Fortunately, today, things are much fairer and, in most cases, children are treated equally, or, at least, equitably.
These changes in the way farms are passed down have brought with them a new set of problems.
Equal sharing of the farm can lead to subdivision into uneconomic units. Then, again, not all the children may want to be farmers so now there may be an expectation that the children who do want to farm must buy the others out.
This equitable sharing then has brought about the need for succession planning. Unfortunately this is a topic that is not covered in any curriculum at University or College so most people are not aware of the benefits of a good succession plan.
Succession planning is an accepted norm in the commercial world as, typically, the succession is not familial but rather just the next generation of management taking over.
Failure to develop a succession plan for the farming family can lead to significant business and family problems, and this applies in family owned businesses as well.
Simply leaving succession to be settled by a Will may lead to farms and assets having to be sold to settle estate taxes and place excessive burdens on those who wish to carry on with farming. This normally leads to family disputes and ill-feeling. In many cases parents are now making succession plans so that their children don’t have to experience these types of problems.
A good succession plan will provide for relationship changes (births, deaths, and divorces) and also set the road map of how the succession will take place. This will help clarify the expectations of both generations.
Other benefits can often be found in that starting the planning early can leave enouch time to plan for retirement incomes for those leaving the business, as well as development of the farm to support the incoming generation.
These plans can help set up the structures that will enable the farm to continue as a viable business and promotes the exploration of off-farm opportunities for those children who don’t want to farm.
