Most young people, particularly in agriculture, focus on the present and not on the future.

While the future is a distance away, proper financial planning should start now.

Most people focus on minimising the tax on the transfer of the farm and minimising tax on income, but don’t give enough time to focus on future financial independence when they get old or decide to retire from the business.

Investment in the farm business is essential for the ongoing good health of the farm but as important is the need to look after oneself financially.

The single biggest issue facing family farms in succession is not the taxes but the viability issue – it’s the ability of the farm to provide an income for the parents as well as the successor. Most farms are not in a position to address this.

Case study

A recent case I came across summarises the position:

A man and wife in their mid-60s would like to retire.

Outside of the old age contributory pension and a very small amount of savings, there is not a crock of gold there to fund both the parents and the successor.

Seventy cows are being milked on the farm and it is making €75,000 to €80,000 profit per year. There are ongoing repayments of approximately €10,000 for improvements to machinery and so on.

If they lease out the farm they would get an income, but they are in the lucky position of having someone to come home to farm. However, the conundrum is how to provide a living for both out of the farm.

If planning had been done 35 years ago and a sum put aside per year of €4,000 to €5,000 a fund would have been available now to assist toward the parents of approximately €200,000 to €250,000.

It is too late now in this case, but options are being examined.

Pension auto enrolment is coming in for employees but not for the self- employed, making proper planning of the utmost importance. The website livingwage.ie details the minimum essential standard of living for a household and is a good guide to calculate what is required into retirement.

Based on a person or a couple, there is a significant shortfall and this should be the minimum target to be funded in the future.

Taking action and planning now will assist with this.

Planning will include having proper:

  • Life cover.
  • Illness benefit.
  • Pension plan.

    • Taking advice from a competent professional financial adviser is a must to put an implementation plan in place on by your farm.