Succession planning is often described as the “elephant in the room” for farming families. Despite being one of the most critical aspects of long-term farm management, it is frequently postponed or avoided altogether. Yet, as recent cases show, failing to plan can have devastating financial, legal, and emotional consequences.
Why Succession Planning Matters:
At Hedges we understand that farming is not just a business, it’s a way of life. The land is often held for generations, and the farm is both a family home and a livelihood. But this deep emotional connection can make succession planning difficult. Many farmers fear that discussing succession signals retirement or loss of control. Others worry about upsetting family dynamics or facing uncomfortable truths about who is willing to take over.
However, without a clear plan, farms risk:
- Legal disputes over ownership and inheritance
- Financial instability
- Family breakdowns due to unmet expectations or unclear roles
- Loss of business continuity, particularly if key individuals become incapacitated or pass away unexpectedly
The Risks of Failing to Plan:
Failing to plan can lead to several risks. For example:
- Inheritance Disputes: As seen in cases like Guest v Guest, Spencer v Spencer, and Winter v Winter, informal promises about succession can lead to costly litigation if not formalised. The courts are increasingly willing to enforce such promises under proprietary estoppel, but the process is emotionally and financially draining.
- Tax Exposure: The upcoming changes to tax around farms, including farms being liable for Inheritance tax, mean that farms previously protected from taxes may now face significant liabilities. Mid-sized farms, often capital-rich but cash-poor, are particularly vulnerable.
- Operational Disruption: Without a succession plan, the death or retirement of a key figure can freeze assets, dissolve partnerships, and halt operations.
Practical Steps for Farmers:
To avoid these risks, farmers should take proactive steps:
- Start the Conversation Early. Don’t wait for a crisis. Schedule discussions during quieter periods and include all relevant family members. Use a facilitator if needed to manage differing perspectives.
- Define Your Vision and Goal. Clarify whether you want to retire fully or stay involved. Understand what successors want and document these goals to ensure alignment
- Understand Your Business Structure. Whether you operate as a sole trader, partnership, or limited company, your legal structure affects succession options. Review ownership, land registration, and occupancy agreements.
- Consult Professionals. Legal, financial, and tax advisors can help navigate complex issues and ensure your plan is robust. Independent facilitators can also help manage emotional dynamics.
- Document Everything. Keep written records of discussions, decisions, and agreements. A well-documented plan is far more likely to be successfully implemented.
Succession planning is a continuous process that requires ongoing dialogue between farmers and their families. By progressively involving younger generations and seeking expert advice, the transition can be managed effectively to safeguard the future of the farm.
Get In Touch
At Hedges, we recognise the distinct challenges encountered by farming families. Whether you are initiating succession discussions or seeking assistance to formalise your plan, our team is committed to providing comprehensive guidance at every stage.
