My wife and I are getting close to retirement age and need to sort out the succession planning around our farm for our three children - one of whom will continue on the farm. I realise I will have to see someone in great detail - but what things do I need to keep in mind or should I ask an adviser in the first meeting. I don't want to be taken for a ride.
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Having a sound succession/estate plan is important especially when there are loved ones such as partners and children involved in the situation. A comprehensive estate plan accounts for all contingencies both whilst we are alive and upon our passing. There can be many variables in each person’s situation and circumstances such as company structures, family trusts, tax implications etc. An estate plan can incorporate how wealth and assets that have been generated over a lifetime are to be dealt with and distributed. A comprehensive plan will potentially involve multiple professionals such as financial advisers, lawyers and accountants to ensure all aspects are covered.
Farms can be more difficult to deal with in an estate plan than traditional, more liquid assets such as banks accounts or share portfolios. Bank accounts and share portfolios can be split or sold quite easily enabling each beneficiary to receive their share. Farm assets, however, are often unable to be split unless sold. Given one of the three children wishes to continue on the farm and the others presumably with to pursue options off farm, the situation becomes potentially even more difficult. Unless there are sufficient off farm assets, an even split of assets will often put the farm in a situation where it is no longer viable. It is therefore imperative to have a succession plan in place as soon as possible to ensure all beneficiaries understand the situation and are comfortable and aware of your wishes.
When you consult an adviser it is important in the initial meeting to get a feel for both who the adviser is and also how they are able to help you.
In the first meeting you should keep in mind:
- Is the adviser I am talking to well qualified? What relevant accreditations do they possess? Are they a member of a professional industry association?
- Have they had experience in this particular area?
- What services do they offer? Are they able to provide advice on all structures and aspects that are present in my circumstances? Are they limited to providing advice on a specific area?
- What level of recognition do they have in their field? Have they won any industry awards or been involved with any industry leading initiatives?
- What level of credibility do they have? Were they referred to me by a reliable source? Have I heard any past testimonials from clients that were impressed with the advice they received?
- How are they paid? There needs to be a transparent fee structure that ensures both parties interests align.
- Does their personality align with you? Estate plans should be updated regularly when circumstances change, therefore there is a need for an ongoing relationship. It is important you get along with your adviser and there is no clash of personalities, ethics etc.
- Is the adviser a part of a competent work team? Do they have a good relations with other professional advisers that may be needed in the formulation of the plan?
- Do they have good support staff? If they are in high demand and have many clients and little support staff they may not be able to tend to your needs for a prolonged period of time. Conversely if they are in a position to help you straight away there may also be a reason, they may receive little or no referrals/repeat business.
To develop a comprehensive Plan the adviser will need to undertake an extensive data collection process including both quantitative and qualitative information relating to the situation.
Some things to keep in mind that the adviser should be asking you:
- What are the roles of each child and your partner on the farm?
- Do you have any special wishes for the continuation of your farm? For example do you wish for it to carry on as it currently is, impose a governing set of rules or do you wish for the decision to be left to the successors?
- If you were to pass away suddenly, who would you like to receive what?
- Upon your passing, do you wish for the farm to continue operating or do you wish for it to be wound up and sold?
- Are there special considerations to keep in mind with your children, for example do any of your children sometimes irrationally purchase things they don’t need or do any of your children have a substance abuse issue?
- An extensive quantitative analysis should be conducted which may include things such as; what are the values of all the current assets and liabilities, what the cash inflows and outflows the farm has, what is the profit/loss the farm has been operating at?
- Do you have any special wishes for the administration of your estate? For example do you wish for all of your children’ debt to be repaid prior to dividing up the estate.
- How are all the assets associated with the farm owned? Are they owned personally, through a company or trust structure or are they leased?
A financial adviser should work on a fee for service basis with this type of work and it is important that you understand how you will be charged before you formally engage that person.
If you have any questions please don’t hesitate to contact our office.
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