Having a ‘how to’ guide written down which details how a farm business operates is a vital piece of the succession jigsaw, a business adviser has claimed.
It also meant there was a safety net which enabled other members of the team to keep an enterprise running in case the person at head of the business exited suddenly.
Speaking on the latest episode of Farmers Guardian’s Have I Got Moos For You podcast, run in conjunction with Semex, Heather Wildman, of Saviour Associates, suggested that farming often saw itself as different when it came to succession planning.
She said: “It should not be [different], but they [farmers] make it different and use it as an excuse for not getting on and getting it done.”
A key starting point in the succession planning journey was, she said, being very clear about everybody’s expectations and what they wanted to get from the business, whether that was financially or in terms of work-life balance.
“Some people can live very frugally [while] for other people, because of their lifestyle choice, that [level of income] would not go near beginning to meet their expectations,” she added.
“They have greater expectations of what they can draw from the business and disparities can
come in if that is not discussed at the beginning.”
Mrs Wildman was speaking on the podcast alongside Ayrshire farmer John Johnston who, three years ago, started the succession process for him and his family.
With his dad and uncle initially farming together, he and his cousin’s emergence into the business meant the time was right to tackle the future direction of the farm.
Mr Johnston drew on the professional advice of Mrs Wildman and said the involvement of an external moderator in the succession talks helped to make it a more formal, and less emotional, process.
He now runs a beef and sheep unit in partnership with his dad, while his uncle and cousin continue to run the original dairy enterprise.
Divorce in a farming family can have devastating consequences for the wider family and business if it is not approached skilfully.
Jayne Turner, partner at Ashfords Solicitors, said the starting point is equal division of the assets, though this can be challenging when there is shared ownership with parents or siblings.
“Frequently, the outcome in farming cases is different as farms can be passed down through the generations and hence treated by the courts as non-matrimonial assets and not shared equally,” said Ms Turner.
“The primary focus is on meeting the housing needs of the departing spouse and any children of the family, rather than seeking to provide a percentage division of the assets.”
She said a balancing exercise must be carried out to meet needs and to ensure a fair settlement is achieved without the farm being sold or its viability damaged.
“An agreed outcome is always best and alternative dispute resolution, such as the collaborative
law process can work well,” added Ms Turner.
“This is where the parties and their respective solicitors sign an agreement committing to resolving the outstanding issues by a series of meetings, which maximises the chances of an amicable outcome and allows for greater flexibility as experts such as those referred to above can participate in the process.”
The difficulties created by a potential divorce can result in reluctance to pass farming assets on and so careful consideration should be given to entering into a pre-nuptial agreement before marriage.
Ms Turner said this will stipulate what should happen financially if the relationship ends and can help protect the family farm from the consequences of divorce and ‘avoid a messy and expensive dispute later on’.
“While not currently binding on the courts, recent case law has shown that a pre-nuptial agreement is likely to be upheld provided that the parties have entered into freely at least 28 days before the wedding, they have fully disclosed their financial circumstances, appreciate the implications of the agreement and its terms are fair and do not prejudice the reasonable needs of any children,” said Ms Turner.
“The courts still retain discretion to make financial orders on divorce, but a pre-nuptial agreement will
be taken into account in all of the circumstances of the case and in the right case, will carry decisive weight when the court is determining the asset distribution.”