Steps Forward to Succession Planning

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Succession planning... No matter what stage you are at in life, if you own a business or property (or both), it is important to think about what you’d like to happen down the track. It’s never too early to start succession planning. It is important that you don’t wait for a ‘trigger point’ before you do something about succession. A trigger point is often something terrible like death, serious illness, or divorce. It’s hard to be making rational decisions about your finances and your future if you are going through an emotional time. As the old Chinese proverb says “The best time to plant a tree was 20 years ago. The second best time is NOW”. Succession planning is a process not an event. A succession plan is rarely black and white. It’s a living, breathing, changeable strategy for transitioning to the next owners. For the older generation, it’s your journey to the next stage of life in a way that suits you. For the younger generation, it’s your chance to step up and take greater responsibility and accountability. Succession planning offers many positives. It can create a huge morale boost in the business and can open up opportunities for important family discussions. It takes patience, specialist assistance, and constructive debate to climb hurdles and identify opportunities. With the right approach, nothing is insurmountable. What is BMO’s ‘Steps Forward’ Program? Steps Forward recognises that succession planning doesn’t happen overnight, that it is a process. To help give all parties some clarity about what has to happen, we have developed what we call our 10 W’s for successful succession. Read through this booklet to find out more about each step. It’s not a strict structure, but a guide to help you through the journey. The steps can be tailored to suit your family’s needs and characteristics.


The first step is to work out what assets we’re actually talking about. It might seem obvious but you’d be surprised by how often we see families who think they have assets to gift away until they start really working out the bottom line. You need to record every item you own and importantly what ENTITY owns it. There are different strategies that can be applied for trusts vs partnerships vs individuals vs companies, so knowing which entity owns what is vital. We work with you to help you identify everything that needs to be included such as property, superannuation, loans already given, assets already passed on, water allocations, shares, life insurance, and even time worked for no wages over the years. As you can imagine, this first stage requires some homework, but it is so worthwhile.


Decide WHO the plan extends to? Is it immediate family or does it include grandchildren? Who is going to be involved in family meetings? Sometimes you can involve different people at different stages. The other important step to take here is to get the right team around you. We recommend your team includes: ŰŰ Accountant – to review the budgeting, cashflow and taxation implications of various transfers and structures. ŰŰ Financial Planner – to assist with life insurance, superannuation and investment planning. ŰŰ Solicitor – to determine legalities of process and structures, draw up agreements and other legal documents, as required, and ensure your Will and Power of Attorney are up to date and reflect your intentions. ŰŰ Banker – to be involved at various stages of the process, especially if you are wanting to gift certain assets or have family members take over debt. Your bank manager may have good strategies on how this can be done with minimum fees and fuss. ŰŰ Facilitator – you can have your accountant or solicitor take on the role of facilitator. An independent person, who can help to chair family meetings, meet with family members individually and help guide the process. If we feel that the family would benefit from an external facilitator, we bring in someone specifically to do this.

W#3 WANT Get an understanding of what everyone wants. This is a time for every member of the family to think about what their individual needs are, and what outcomes they want to achieve from the process. Most of the time, we recommend that this is done individually first – to give everyone a chance to be heard without fear of retribution. Even for husbands and wives, we suggest doing this separately sometimes. It might not surprise you to know that sometimes their needs are different!

Here’s some of the questions we get you to think about: ŰŰ ŰŰ ŰŰ ŰŰ ŰŰ

What is your current situation? What do you want to change? What outcome would you like to see? How would achieving the outcome make you feel? How will it make others feel?

We then bring the family group together to share and listen to each other without judgement. You’ll need to recognise that some family members will already be clear about what they want, some might not be sure. If your children are still young and single, you know their priorities can and WILL change as their journey in life goes along. At this point, it’s not the time for working out the nitty gritty. If you start going into details too early, you could debunk the whole process.

W#4 WORK This is where we kick off family meetings. Remember the family meetings don’t have to always be about the big ticket items, you might just discuss operational matters, but it’s good to get in the habit of meeting, and invite non-farm children home to meetings when they can. Set ground rules for the meetings and always have an agreed agenda and purpose, and a time frame. Good communication is vital. If you don’t communicate clearly, people will start making assumptions. And assumptions can sometimes be wrong! It’s so important to listen without judgement, and ask questions before you jump down someone’s throat! Get curious before you get furious. There are two things we do with families to help with communication. Firstly – we help you understand different communication styles. We encourage our farming families to do a DISC profiling session. This is a universally recognised tool that helps people understand their different communication styles and how that impacts the way they work together. For example, Dad might be someone who is an assertive decision maker. The son might be someone who needs more time to think through a decision or course of action. This can cause all kinds of challenges. The DISC session allows family members to talk about how they can address these differences to work better. Secondly, we make sure that families acknowledge generational differences. Longer lifespans mean that we have more and more generations working together. Australians are retiring later, so chances are that you are interacting with at least three different generations. Understanding generational characteristics can really help improve empathy and understanding in your family group.


Succession planning is not black and white. There are many ways for the next generation to get some control and/or ownership while ensuring the parents retain security and a comfortable lifestyle. There is no one option that is the better than another - it depends on the individual circumstances.

When weighing up the options, 1. Look outside the square. Remember there’s more than one way to approach it. 2. Put everything on the table and work through pros and cons of each. 3. Continue to revisit all the parties individual needs and try to find options that are mutually satisfying. 4. Don’t underestimate how much you’ll need for retirement – we are all living longer. 5. Consider tax vs asset planning – sometimes there are compromises to be made. (Don’t be so afraid of tax – we have ways of making it work…) 6. Get advice on technicalities like ownership structures, aged care rules, superannuation and capital gains tax. 7. Trust in your advisors who aren’t emotionally attached to the assets and the family.


When do you plan to retire? When do you hand over or sell assets? Timing can be different for everyone. It can be daunting thinking about the whole process, so break it into chunks. Then set realistic timeframes for different steps. Also, when you are thinking about WHEN remember to have safeguards in place in case trigger points occur unexpectedly. Eg. you might be planning to hand over one asset in five years time, but you die before this happens. Does your Will reflect what you expect to happen? It’s a little like chess. You always need to be looking several moves ahead while you continue to adapt constantly to the changing environment around you.

W#7 WORKABLE OPTIONS This is where you decide which option you are going to implement or trial. If you have been communicating with the family, and have weighed up the options appropriately, then this stage should fall into place – like the final piece of the puzzle. Getting to this point is not always easy, but we’ll work with you to find practical ways to implement your plan.

W#8 WRITE IT DOWN This isn’t so much a step, but a practice you should get into the habit of all the way through the process. Keep records of your meeting decisions and your intentions. Make sure your intentions are also reflected in your Will. Remember succession planning is a process not an event, don’t wait to update your Will and Enduring Power of Attorney, you should be doing this as you go.


Sometimes part of the process is to wait. You might have all the plans in place, but you have to wait for certain aspects to fall into place before you can make the next move. Waiting can also give you a chance to trial your preferred option, before you set it into stone. For example, you might start operating different farms as separate business units for a period of time before any transfer of ownership occurs. Waiting can be frustrating and difficult, but you have to have patience, keep communicating, and keep focussing on the end goal.

W#10 WIN

It’s important to focus on the positives succession planning offers. If it’s done right, it can create a huge morale boost in farming businesses, when the younger generation sees a glimpse of something changing. It can open up opportunities for important family discussions to be had (and not waiting for a trigger point to have them).

Succession planning takes commitment. You need patience, specialist assistance, and constructive debate to climb hurdles and identify opportunities. With the right approach, nothing is insurmountable. As you start to move forward, tick off things in your plan – celebrate each milestone, enjoy each moment.

HOW DO I START? If you’re interested in succession planning, talk to your family. Share this booklet with them. If you’d like to proceed, make an appointment to see one of the experienced partners at BMO or just give us a call to have a chat. Taking that first step is often the hardest. So remember you don’t have to be able to see the whole staircase to take the first step.


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