First things first, succession and inheritance are two different things. Dealing with families and land can be a tricky, not to mention emotionally charged, business.
Just because you are talking about succession does not mean you are signing everything over at once.
Succession is the gradual transfer of management from one generation to the next.
Inheritance is the legal transfer of ownership from one generation to the next. And ‘farm transfer’ is a combination of succession and inheritance.
“People sometimes confuse what succession is about,” Tom Curran, Teagasc farm management specialist, told the ICMSA farm succession meeting in Tullamore on Wednesday night. “Succession starts when you begin to take interest in the day-to-day jobs on the farm.”
There are five steps to the succession ladder:
1. No successor identified
Some people are at the stage where they have no yet identified who their successor is.
This could be because there might not be someone to identify.
Maybe potential successors are too young or not interested. Or it could be the case that there is more than one potential successor.
2. Successor identified but no plan in place
Setting out roles and responsibilities is part of the succession planning process.
It is recommended that a succession plan is put together with all parties involved and an external person such as an agricultural advisor.
The plan should cover timing, amount of responsibility and financial implications.
Tom Curran says that a gradual transfer is good to let the existing generation step back in stages.
He added that planning succession improves communication between generations.
Using the communication iceberg he made the point that it is what is beneath the surface can bring down the ship.
3. Development of a succession plan
At this stage the successor is identified and a plan is in place.
The next step is to implement the plan and agree a review date each year. Start of the succession process
The plan is being implemented and all parties know the levels of responsibility they have at the different stages of the succession plan.
A partnership could be worth considering at this stage.
4. Ready for farm transfer
This is the end goal of the succession process.
This is where you employ various professionals to help with the transfer process and ensure that tax liabilities are as low as possible.
The two speakers at the meeting, Aisling Meehan and Tom Curran, recommended that you should challenge your professional team of accountants, advisors, solicitors, bank managers etc, to work together for you.
“I have found a lot of situations where a farm transfer is done but there is no mention of BPS or entitlements. It can affect other farm schemes too,” Curran said.
Planning
Tom Curran recommends that you start the succession process in good time.
"If you dwell and procrastinate it can be the big elephant in the room that you shy away from," he told the meeting.
"It often doesn't happen until the son or daughter is nearly 35 and there's a tax reason for transferring the farm. You often need to have a plan in place 10 years previous to that."
The Farm Succession and Transfer Guide can be found in Teagasc offices.
It was written by Tomás Russell as part of a PhD study through the Teagasc Walsh Fellowship Programme.
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