For so many farmers, the conversation about succession can be a difficult one to have. There are so many different eventualities to prepare for and many are afraid that by talking about it they are tempting fate. Farm succession expert, Heather Wildman, says that the six Ds farmers need to prepare themselves for are:

• Death
• Disability
• Disaster/disease
• Divorce
• Disagreements
• Debt

This for me is why it is essential that we encourage more families and businesses to communicate with their professional team and their family, somebody must bring up the conversation. The sooner families start these conversations the easier it can be and the more natural it becomes. Unfortunately, many people have a fear and aversion of engaging openly with accountant, lawyers and bank managers – “they may say no! what will they think, how much will it cost, surely we can manage without?”

Your role as the professional engaging with your client is essential, you are their trusted partner, you have the intimate knowledge and structure of their business and their financial position.  You have regular contact with them, or at least on an annual basis.

Some families can talk openly and freely but many will never be able have the succession conversation without an independent facilitator in attendance to trigger the conversation and manage the emotions. There are a number of life events that can trigger the succession conversation. A family member might get married or start a new family. Someone may wish to retire or school-leavers may join the business. Someone could become ill or there could be high levels of conflict or a breakdown in communications.

Before I start with my clients, I need to know what they want out of their succession plan – where are you today, where do you want to be and how will you get there? The who do we communicate this too, how do we communicate it, in what form and how often? Finally, have we the right skills to achieve this, have we the right people in the right seats and where are the gaps, who do we need on board to achieve this goal and vision?

Then they must know their numbers, this is absolutely key to the ongoing viability and success. We need full transparency. I call this derisking your business.

Open questions that I frequently use are:

• How are you feeling about the business, have you thought about when you want to retire or if you are no longer fit enough to be able to manage and run the business?
• How do the other family and business partners feel?
• Have they the skills and experience to be able to take on the business?
• What provisions have you made for children not involved in the business?
• Can you afford to retire from the business and for the business to support another household?
• Do you know what your spouse or children want?
• How well do you know your business agreements? Whose name and signature is on things like the bank accounts, land or herd number, tenancies, single farm payment?
• How exposed are you if something happens?
• Have we wills and powers of attorney, are they up to date and signed?

There are a number of guiding principles to succession. The first is that there is no one size fits all solution; each business solution is different and unique. It is important to obtain quality professional legal and accounting advice. Open communication is key and you have to be able understand and respect the differences in generational values within the business and family.

So many accountants talk about “managing” tax during this process. This is essential and important and, by being open and planning in advance, the tax can be managed, but by keeping things in the dark there is a risk the family may end up in a legal battle with each other and/or requiring counselling and therapy.

Agriculture and rural businesses are unique. Is your accountant talking your language, engaging with you and challenging your business and do they fully understand and have experience of your industry? If not, then possibly it is time to review your accountant or ask if there is another partner who does.

Checklist – some of the technical information your client needs to collect and have written down and in place includes:

• Legal will(s)
• Power(s) of attorney
• Property deeds
• Tenancy and contract farming agreements
• Mortgages and loan information
• Past and any current tax records and information
• Past and current financial records
• Past and current financial statements
• Past and current production and performance records
• Bank account information
• Savings and off-farm investment information
• Retirement planning and savings
• A current list of debts and other liabilities
• A current list of suppliers and service providers (e.g. lawyer, accountant, nutritionist/feed company, equipment supplier etc.)
• Any other business-related material or information

“Powers of attorney are just as important as having a will. It could be the case that you’re skiing and there’s an avalanche that stops you from getting home,” says Wildman, adding that it is amazing that often only one person is privy to bank account information.

Things to plan for when preparing for the six Ds include: current and future family expenses, education of children, building or buying a house or houses, retirement lifestyle needs and care home costs.

There is no right and wrong answer in developing your future plan; the aim is simply to provide the best possible outcome for your family and your business.

Hear more from Heather and the challenges of succession at the Farming and Rural Business Conference.