Succession planning.

[Skitterd]

I'm after some advice re succession planning, which is a minefield at the best of times.

'Theoretical' situation. Son works at home all life with father (not much input, treated as worker), other sibling has no interest and never worked on farm.

By 50 the essentially takes over the business, with father's blessing (father remains partner, but backseat) Lots of historic debt been built up (due to father;s dogmatic approach) and tough times ahead.

Son manages to turn things round and begins paying off debt.

At point of son taking over there are no 'assets' to speak of as debt wipes them all out, talk of succession / wills etc is essentially moot. However, as things improve, son not taking any money out the farm, putting all he/they make into paying off the debt, father says he's going to now give half the worth of 'his' share of the assets (land that son has worked to pay off) to his other child.

Hard question, as nobody wants to be selfish, but without the son changing things (with very ltd input from father) and paying off the debts there were no assets. Once mortgage / loans paid off, with son having used all the money he's generated, the none farming sibling suddenly gets handed their share...despite putting nothing in.

How do you sort that out?

There's many sides to this argument and many ways of looking very selfish or stupid.

All opinios valued.

 

[Skitterd]

*by 50 the son essentially takes over

 

[The Seeker]

Feel for you , many businesses I know seem to be stuck in this 70 -80 yrs old not actually retiring ( only in name ) it’s very difficult even with all the conversation the world, it seems the longer they go the less they want to let go.

 

[Farmer_Joe]

There’s nothing selfish in your approach, you have worked and effectively given your fathers shares value which he has then given away.
I would not waste time and speak to a solicitor and get all the info showing what’s happened and how you have added the value, I’m not sure it will help but they would best advise.
My experience no matter how much you give and what they say before hand when the end is nigh parents just split it up equal.
I put up loads of sheds did fencing and generally improved the farm all round for no wage sadly when I had to buy other parties out all I had done was add value making it more expensive for me! Lesson learned

 

[Fogg]

If you're a partner in the business I'd argue that your share of the business's worth in the capital account is yours, your dad's is his, and he's entited to divide his share between both his kids if he wishes.

It's not fair, given the sacrifices made, but it's a compromise.

 

[MCook]

A difficult, and sadly common, problem @Skitterd

I'm assuming the issue is that all of the assets are in father's name, therefore son has just been entitled to a profit share (of which there hasn't been much)? Unfortunately, as Fogg stated, if all assets are in father's name, there may be little the son can do in terms of how father decides to allocate this in his will.

Worth checking the partnership agreement, but I would always encourage a discussion between the family as the first port of call. If things can be resolved amicably, it is a) a lot simpler, and b) a lot cheaper. Baring that, an agricultural solicitor would be your best bet.

 

[Landrover]

I feel for you, nothing in place here, in partnership with 1 sibling and my parents who are both in their 80s, they have both just changed their wills to include a non farming sibling, to help them after losing a large amount due to divorce not sure of what they have done because it has nothing to do with me as it's properties that belong to them ! Waiting for death before there will be any changes

 

[B R C]

If you have worked for very low wages for a long time whilst a lot of debt was repaid and the assets are to be divided equally I would think you would have a good case to challenge it and get it more in your favour as you weren’t being paid the correct wages(if true), but obviously you would need professional advice on this…..

 

[Greythundercloudys]

A very common story, abit like mine, me the youngest of 3, 2 sisters & me, who when you look back 30 years ago was just a kinda slave, while the sisters got cars etc etc, l was told one day you, ll get it all. So when that day finally came l also had to give them 25grand each, after all those years working hard, mostly just to keep them in the farm and keep the piece and not rock the boat. Iv only a daughter so she will get it all, she can sell it, whatever she wants. I, ll have done my best.

 

[BrianV]

I'm after some advice re succession planning, which is a minefield at the best of times.

'Theoretical' situation. Son works at home all life with father (not much input, treated as worker), other sibling has no interest and never worked on farm.

By 50 the essentially takes over the business, with father's blessing (father remains partner, but backseat) Lots of historic debt been built up (due to father;s dogmatic approach) and tough times ahead.

Son manages to turn things round and begins paying off debt.

At point of son taking over there are no 'assets' to speak of as debt wipes them all out, talk of succession / wills etc is essentially moot. However, as things improve, son not taking any money out the farm, putting all he/they make into paying off the debt, father says he's going to now give half the worth of 'his' share of the assets (land that son has worked to pay off) to his other child.

Hard question, as nobody wants to be selfish, but without the son changing things (with very ltd input from father) and paying off the debts there were no assets. Once mortgage / loans paid off, with son having used all the money he's generated, the none farming sibling suddenly gets handed their share...despite putting nothing in.

How do you sort that out?

There's many sides to this argument and many ways of looking very selfish or stupid.

All opinios valued.

Difficult but maybe as a compromise 2/3 to the son who's worked his guts out & 1/3 to the other son, no father likes to give nothing to one son & everything to the other.

 

[Still Farming]

Is the Dad still alive ?

 

[toquark]

Difficult one, is there a cottage or something tangible that could be left to the non farming sibling?

 

[chipchap]

Somebody needs to take your father to one side and have a quiet word, maybe accountant, family friend, or auctioneer.

Note to younger readers on here: Get thing sorted early on; unrecorded promises are worthless.

 

[Kidds]

Note to younger readers on here: Get thing sorted early on; unrecorded promises are worthless.

That sentence should be made a sticky on this whole forum.

 

[chipchap]

Coming at it from the other point of view, it is often difficult for the older generation to divide things fairly; farm businesses are asset rich in many cases, but there is rarely enough liquid assets to provide any flexibility.

Sadly often the issue of succession and division of assets amongst the next generation is swept under the carpet, and people make assumptions with no real basis. Misconceptions become entrenched; parents tell children what they think they want to hear to placate them, with no real intention of keeping their word. The whole thing becomes a complete mess

My advice to any young person is to secure your position legally. Get documents drawn up and signed; get your share of the business capital documented in the accounts properly. Do not simply take anybody’s word for anything. If you cannot get the answers you require leave and plough your own furrow while you are still young enough.

I know of one family with four children that has family meeting to discuss the future where everything is minuted and recorded like a business board meeting. An excellent idea IMO.

 

[chipchap]

If you're a partner in the business I'd argue that your share of the business's worth in the capital account is yours, your dad's is his, and he's entited to divide his share between both his kids if he wishes.

It's not fair, given the sacrifices made, but it's a compromise.

Yes, but is the property on the balance sheet?

 

[Kidds]

I know of one family with four children that has family meeting to discuss the future where everything is minuted and recorded like a business board meeting.

At one point our farming enterprise had 13 partners, all family, and that is pretty much how we always did things. All accounts were drawn up showing exactly who had what capital in the business.
This wasn't perfect but it is a much better way of doing things than a promise.
We also had a proper partnership agreement too which said what happens if anyone decides to leave etc. Not a long document, I think it was about 10 A4 pages that could easy fit on 5. Everybody knew what was what and if there was ever a dispute the agreement was there to fall back on.

 

[farmerm]

Yes, but is the property on the balance sheet?

Not if older generation is wise enough to recognise there is a 1 in 3 chance an offspring wife (or husband) will bail and take 50% of the offspring's share with them...

 

[chipchap]

Not if older generation is wise enough to recognise there is a 1 in 3 chance an offspring wife (or husband) will bail and take 50% of the offspring's share with them...

Another important consideration.

Often the spouses of the children are the source of all family discord.

 

[kiwi pom]

I'm after some advice re succession planning, which is a minefield at the best of times.

'Theoretical' situation. Son works at home all life with father (not much input, treated as worker), other sibling has no interest and never worked on farm.

By 50 the essentially takes over the business, with father's blessing (father remains partner, but backseat) Lots of historic debt been built up (due to father;s dogmatic approach) and tough times ahead.

Son manages to turn things round and begins paying off debt.

At point of son taking over there are no 'assets' to speak of as debt wipes them all out, talk of succession / wills etc is essentially moot. However, as things improve, son not taking any money out the farm, putting all he/they make into paying off the debt, father says he's going to now give half the worth of 'his' share of the assets (land that son has worked to pay off) to his other child.

Hard question, as nobody wants to be selfish, but without the son changing things (with very ltd input from father) and paying off the debts there were no assets. Once mortgage / loans paid off, with son having used all the money he's generated, the none farming sibling suddenly gets handed their share...despite putting nothing in.

How do you sort that out?

There's many sides to this argument and many ways of looking very selfish or stupid.

All opinios valued.

Is the non farming son the oldest or youngest?
I often hear that one or multiple children have no interest in the farm but sometimes they realise that there isn't room for them, oldest stays home, youngest leaves school and there's not enough work so they have to go off and do there own thing.