Due to the massive amounts of capital tied up in land and other farming assets, succession in farming is different and probably more difficult to deal with than for any other business.
If you have three children and £10million tied up in your main asset of an income-producing tower block of flats it’s easy. You do exactly as you want. Each flat will produce rent so each of your children can be allocated their share. You can divide it any way that you please.
If you have three children and £10million tied up in your farm it’s a little different.
Often, at least one or two of the children will have left home. They will not be involved in, or in any way dependent upon, the farming business – but is it the right thing to do, to pass it all to the one or two who are at home and involved?
Isn’t it unfair to Mary, if you pass the whole farm to Jimmy and Johnny?
But if Mary has a third share, what’s the good of that to her? She may receive a little rent but compared to the capital value that’s a insignificant return.
What if she “wants her money out”?
What would the effect on the business be?
Could it service the cost of buying her out and still remain viable?
If her share was sold off what would the effect of the loss of that land be on the business?
You do not get a second chance with succession planning, so it is essential that you get it right.