Monday, August 8, 2022
12.8 C
Galway
HomeFarming NewsFarm succession planning needs 'sensitivity, patience and trust'
Reading Time: 4 minutes

Farm succession planning needs ‘sensitivity, patience and trust’

Whether running a dry stock farm or small rural business, parents are faced with nominating what family member (if any) is going to continue on with that enterprise, writes Bernie Leahy, B&T Drystock Adviser, Teagasc, Galway/Clare. 

Low returns from most Irish drystock enterprises prove that farming fulltime is not a viable choice. Selecting or accepting a suitable candidate is not an easy task.

Dynamics and mediation

Family dynamics is a fascinating area and in Ireland 90% of farms and rural businesses are family-run. Sensitivity, patience and trust are needed in approaching succession planning.

Judge Peter Kelly, President of the High Court, Dublin, encouraged the use of mediation when the Mediation Bill was published in February 2017. He hoped the bill would encourage greater use of it in the future because of the cost to society of litigation and acknowledged the social benefits of mediation also.

Claire O’Keefe, a mediator with Succession Ireland and a member of Mediators Institute of Ireland compared the family mediation process to “a succession triangle” in her article “Nothing Succeeds like Succession”, Law Society Gazette, Jan /Feb 2016.

She explains that the mediation process is basically managed as a series of meetings held initially with all family members individually called pre-mediation meetings. 

At the end of these individual meetings, the family members sign an “Agreement to mediate”. The family members agree on the terms on which they are to come to their shared meeting.

This mediation process is used to create the family succession plan based on information that all parties have on the history of the farm. All family members can contribute and issues such as parent’s care plans may also be discussed.

Outcome

If successful, the family members may reach a consensual agreement and this agreement is called the mediation agreement. This is to be signed by parties as well as the mediator.

It may transpire that the succession agreement may not be signed off on until parties have legal and or accountant/advisor with them or the family members are given more time to get this additional advice.

A memorandum of understanding, containing the provision that family members should get further advice in areas of tax, legal and health care issues may be the outcome of the mediation meeting.

It may transpire that family members may need time to research issues but a platform has been achieved where issues have been raised and, hopefully, options discussed and key common issues have drawn the parties together toward collaboration.

As parents get older, there are factors associated with age and dementia, where the parent’s capacity to make a decision may be impaired in the future running of the farm business and in inheritance transfer.

Mediation may not be suitable in this instance and decision making in relation to the farm and family business may lie in the hands of the legal system, i.e. the parent being made a Ward of Court.

Other unsuitable cases where mediation is not recommended are cases of criminality, child abuse addiction and/or alcohol abuse. In such cases, a mediator is obliged to refer the case to the appropriate service to protect the parties involved.

Canadian model in farm succession

A factsheet on farm succession from the Ministry of Agriculture, Food and Rural Affairs, Ontario, March 2010 showed the steps of succession planning;

The Preliminary Step involved: Open lines of communication, define objectives and goals, identify a successor and assess the compatibility of objectives and goals

Step 1: Involved collecting and analyse information relevant to the farm, stock and business information;

Step 2: Generate options;

At all stages of the process family members must make the decisions and come to a consensus with other members.

Step 3: Make preliminary decisions. Once the family know how they wish to proceed with the plan, a preliminary plan needs to be drafted;

Step 4: Design, develop and write a review;

The succession planning sessions need time for the family to have the options to review and perhaps regenerate new options. Family members need to feel comfortable with their decisions.

The written succession plan could include;

  • A summary of succession plan with a business overview;
  • A retirement plan, care plan for elderly, disabled family members;
  • Financial plan;
  • Supporting documentation;
  • Contingency plan.

Step 5: Implementation/Monitoring of Plan.

This succession plan, although very simplified, helped the family members to focus on what their goals were.

Every farm family plan is unique. The Canadian method of succession planning involves a process where knowledge, skills, labour, management control and ownership of the farm business between the owner and the successor is done by the interaction of the family.

The family make the decisions themselves with the help of trained advisors in areas of agriculture, accounts and social science, acting as mediators.

- Advertisment -

Most Popular