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A guide to planning for the future, sponsored by Inside your Succession Planning magazine

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How to keep the succession conversation going with your family Why now is the best time to write a will rather than later

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The importance of planning for unexpected life events Putting a lasting power of attorney document in place

13 16

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Wealth modelling: What it is and how to do it Complete our checklist to see what documents you need



‘Succession planning is critical for the prosperity and happiness of everyone’


eing a good business manager is not about flying up front for a lifetime, and farming is no exception. It means having the ability to step back and let others fly into the space with fresh energy and ideas, recognising that this can help secure the business, rather than threaten it. It is all about communication, honesty and action, so you can pass the baton, one generation to the next. It is about allowing change to happen in a way which

creates strength and celebrates the growth of abilities and ideas, so each generation is more capable and better equipped to face tomorrow. Ultimately, succession planning is critical for the prosperity and happiness of everyone who is involved in a farming business. Yet we know many farmers find it hard to let go, and many families find it hard to talk honestly with each other about it. Our last succession supplement focused on starting the

conversation and this booklet takes things to the next level – continuing those discussions, making decisions, and putting a plan in place. Because there is one thing we know about succession, it is not a one-off chat. It is a lifelong discussion which has to change and develop alongside you, your family and your business. Caroline Mason Head of agriculture, Co-op

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Continue the conversation


In our last succession supplement, Heather Wildman, family facilitator and managing director at Saviours Associates, gave tips on starting the often tricky conversation with family members. Here she offers advice on how to keep communicating.

Tips for ongoing communication


uccession planning is not a one-off conversation – it is a lifelong process of ongoing conversations as family members’ circumstances, aspirations and wishes change. Listening, understanding each others’ perspectives, and having regular family meetings are all key.

Understand each other

Family members will likely have different views, particularly between generations. Different generations may have differing work ethics, ways of managing, views on quality, priorities which effect how and when they show up for work, lifestyle expectations, education and experiences. It is also important to understand how you feel. Emotion plays a huge part in our decision-making and in our action or in-action. It is helpful to name your feelings and identify what they relate to. For example, you might be excited about opportunities onfarm, anxious about money or worried about family disputes.

Hold ‘honesty meetings’

Have regular family meetings

where you all get together and are open and honest about your feelings and needs around succession. Hold these at least once-a-year, so plans can change as life does. Often, people have never had the chance to speak-up. So when asked what they want they perhaps do not know. If that is the case, try asking what they do not want as a good place to start. Every family is different, so do what works best for you at the time. For example, I work with a family that goes away between Christmas and New Year to discuss their plans. Another family holds its meetings while having a big walk. Before the meeting, everyone

Emotion plays a huge part in our decision-making and in our action or in-action HEATHER WILDMAN

should think about their goals over the coming years – personal, business, family and the whole picture. As a family, ask; where is the business currently? Where do you want it to be? What makes

What if you cannot get someone to talk? PARTICULARLY with older family members, sometimes it is about playing the long game and sowing the seeds of a conversation. Try to find the niche of what they want to talk about and a way to a common dream.

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For example, ask them what has been their greatest achievement on-farm and if there is anything they wish they had done differently. Use this to gently talk about what you would like to do differently as the next generation.


Continue the conversation Succession meetings do not have to be held around a kitchen table, they could take place during a walk. Do whatever works best for your family.

you happy? What makes you unhappy? It helps to each consider before the meeting: • Business goals: What do you want to achieve/build in your business/career/legacy? • Personal goals: Where would you like to be in terms of happiness, health lifestyle, home, wealth, etc.? • The strengths, weaknesses, opportunities and threats of your current business and personal life. • What is your current financial situation? (Mortgage, loans, credit cards, overdrafts, debt, rent, salary, contracts, properties/land, life

insurance, shares, savings, pensions, diversifications). • Have you got a Plan B? What are your options? • What do you want to achieve in the next meeting?

Communicate constructively

No-one knows how to push your buttons like your family does. It is therefore key to try and communicate in a way which is business-like and professional during meetings. Ensure you have an agenda, with clear topic titles and time scheduled for each. Delegate a chairperson, or invite a third party

in if things are difficult. Consider holding it away from the farm. Record minutes and circulate these. Agree actions, deadlines and who is responsible for getting them done. Understand that listening is as much a part of communication as talking. Remove the emotion from your words, by taking the ‘I’ and ‘you’ out, so it is less personal. Always remain respectful, do not interrupt, or pull faces and huff and puff when someone else is speaking. Allow everyone a turn to talk, and, finally, agree what your common mission is, and your values going forward.

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Create a will


There is no better time to write a will, which has long been a taboo topic for many families, says Rachael Madeley Davies, consultant at Kite Consulting.

Succession planning and a will must work together


riting a will and succession planning are separate things which should complement each other. We have all heard farmers say, ‘one day, this will all be yours’. But, actually, dad or grandad might go on farming until they are in their 90s and son or daughter could be into their 70s and still not have their hands on the cheque book. Succession planning is a very different thing. It is more about the here and now and the structure of the business today, rather than what happens when you die. Wills can often be used as an excuse by some to avoid the difficult conversations associated with succession planning. But as we know, it is one of those nettles which needs to be grasped by all businesses. The two elements are

Rachael Madeley Davies

Writing a will is a really good way to communicate your wishes and choices to your whole family.

not an alternative but need to work together.

Why you should have a will

Whether you are a business owner, farm labourer or contractor, everyone should have a will. Even if you do not own any land or property, it is a way you can still have some control over what happens when you die. That includes things like funeral arrangements, who receives your personal effects or what happens to your business. There is no minimum or maximum age but people should not leave it until they are too old. Shape Your Farming Future sponsored by

There is a big misconception that wills are for elderly people. The last thing you want to be doing is writing a will on your death bed. Writing a will is a really good way to communicate your wishes and your choices to your whole family.

What a good will should include

The best wills are extremely explicit. In the example of a farm owner dying, the will should clearly state what is going to happen to the land, livestock, machinery, entitlements and who it is going to apply to. The document should also be


Create a will

very clear on who will administrate the will, who is the executor and who are the beneficiaries. Providing you have discussed the contents with your family, this will eradicate any unnecessary uncertainty, fall-out or angst, so business can continue.

What happens when there is no will?

Dying without a will is called intestacy. Dying intestate means your effects are divided by a default amount between your spouse, civil partner or children. You essentially surrender all control to an external body and the executor of your will is chosen for you. This neglects offspring who may have played a prominent role in the farm and is where disputes regularly arise from. Businesses can also lose a lot of money and split up as a result. If this happens, families have to apply for a grant of representation to allow them to carry on running the business. These can take months to get, paralysing businesses from carrying out day-to-day operations and often means they have to cease trading. You would not let an external party have a say in running your business when you are alive, so why would you after you have died?

Common pitfalls with will writing

The most common pitfall for farmers is not talking. You still hear of cases of children not knowing what is in their parents’ will purely because there has been a breakdown in communication in that area. Death is still a taboo subject in this country, but once someone has died it

is extremely difficult to have a will changed. Quite often the value of an estate can disappear on legal fees if you are trying to dispute a will. It is so important to the whole process to make sure your family is aware of what your desires and wishes are. However, the most common side effect of poor communication is family breakups. With

such large sums being disputed, it is critical families have time to discuss what will happen after a death.

How often to update your will

It is very important that wills are both valid and regularly updated. When reviewing your will you should question if it is up-to-date, which effectively

For more information, visit FGinsight.com/SYFF

Create a will


Top tips define who you want to have what • Update it regularly when major things change in your life • Speak to a solicitor if you have questions or concerns

• You cannot write a will too early. Many people start as young as 18 • Discuss contents with family long before you are ill or elderly • Be explicit and clearly

A will should be very clear on who will administer it, who is the executor and who are the beneficiaries.

means have there been any significant changes since it was last updated? This includes any family marriages, deaths, divorces, changes to business structure or if children are now grown up. A good rule of thumb is to check it every 10 years, or when something major changes in your life, that of family members, or the business.

Get your will done and dusted

In the UK and, in particular, farming communities, we have a stiff upper lip. Two of the biggest taboos in agriculture are talking about money and talking about death. So we are combining both of those when talking about writing wills. Time is another common excuse. They are just not priori-

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tised with everything else going on around the running of farm businesses. They are actually bread and butter for solicitors, who offer fixed rates on wills and can prepare them in a matter of hours. Prices can vary greatly from solicitor to solicitor and business to business but an average price would be about £500 and could be sorted in one meeting.


Plan for the unexpected

What would happen to your farming business and family if the main farmer suddenly died or could not work? Oliver Hall, senior farm business consultant at The Andersons Centre, explains how to put a plan in place.

Planning for the unexpected


e probably all sadly know of situations where farmers have died too young. If there is no plan in place to guard against this, family members are often left with complicated legal

issues and difficulties running the farm, alongside their grief. Here are some tips on avoiding this.

Write a handover manual Spending half-a-day writing down key contacts and protocols could

be one of the most valuable things you pass on. Ask what would happen if you got hit by a bus tomorrow – could the business continue the next day? Include: • Contact details of key suppliers,

Do not act like a superhero when it comes to running your farm. Ask yourself what would happen to your business if you got hit by a bus tomorrow.

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Plan for the unexpected customers, your accountant, consultants, bank manager. • What you do on the farm and when, daily, but also throughout the seasons. • A map of the farm with key features, such as drains and water points. • Contact details of people who could help in the event of an emergency, for example, relief farmworkers.

Pass on skills

Continually pass on skills – build a team and culture where every-


one knows how to do each other’s jobs. If you always do a job, ask someone else to come with you so you can show them. The test is whether you could take a holiday with a week’s notice.

create financial protection for when a person dies, often designed to match borrowings a business has, or provide a sum of money to replace the earning potential of that individual.

Keep an updated business plan

Get key legal documents

Always have an updated business plan and share that vision with your family and staff so they would not lose the strategy and direction.

Consider life insurance

Life insurance is designed to

Put in place power of attorney so family members can continue to run the business, make decisions and access bank accounts if you became suddenly too ill to do that. Ensure business agreements have the correct dissolution clause in the event of a person’s death, so allow the agreements to continue, otherwise bank accounts could be frozen and the business wound up. Set up a will. Without this, cash can sit in an account for six months or so while families work to get probate, impacting cashflow and ability to pay suppliers and staff. For more on wills turn to page 5 and for power of attorney turn to page 11.

Release family from a duty to farm

Talk to your family. Would they want to continue farming without you? There are too many people farming through real hardship out of a sense of duty to keep it all going, rather than because they want to. Have an honest conversation and tell your family they are not obliged to farm. If they do not want to continue farming or owning the asset, put in place a sale plan. If they would want to continue staying on the farm, but not farming, look into joint ventures or employing someone to run the business. Shape Your Farming Future sponsored by


Plan for the unexpected

Case study: Plan what you can AYRSHIRE dairy farmer Bryce Cunningham has had more unexpected life events to cope with than most, but the forward planning of his family helped him devise a way through. He had been away from the 89-hectare (220-acre) tenanted family farm for 10 years, working for MercedesBenz, when his mother rang to say his grandfather was ill and could not continue to work on the farm, and she was worried there was something wrong with his father, Robert, who had begun forgetting things. Bryce took a break from work to help out, but never went back to his job. Within three months his grandfather died, his grandmother fell ill and the family discovered Robert had terminal cancer. Forward planning by Bryce Cunningham’s family has helped him get through some unexpected life events.

Sadly, a year later, Robert died too. At the same time, the dairy crises sent the farm’s milk price from 29ppl to 9ppl within a year, causing £100,000 of losses. Bryce says: “The bank was asking for money and everything pointed to bankruptcy.”


Luckily, the family had put in place all it could – his father and grandfather had wills, his father had life insurance, they had partnership agreements which passed their business shares to Bryce, and his father had power of attorney over his grandfather. “These plans helped give me guidance and we were able to draw up a family agreement,”

he says. “We all sat down together, me, my mum, sisters and aunts, it was a massive task.” This gave him the basis to change the business. Bryce decided to escape the commodity market, go organic and start bottling and selling the farm’s nonhomogenised milk direct. This saved the business. With a young son, it also forced Bryce to plan. He says: “I went straight to a solicitor to create a will and to talk to a life insurance adviser. Dad’s life insurance does not cover the debt, but I found that if he had been paying just a little bit more each month it would have made a big difference. “I also wish we had sat down together when he was alive and really talked about whether we could go organic. He had always shot down my idea but I saw him struggling his whole life with a high production system. “You cannot plan for every eventuality, my family obviously had not planned for my father to pass away before my grandparents, but if the average family farm had been set up how we were then I dare say they would have been okay. “Farming families need to understand what each individual wants from the business. “Sit down and talk about it. It is really important.”

For more information, visit FGinsight.com/SYFF

Power of attorney


A power of attorney document allows a trusted person to make decisions on your behalf, should you lose mental capacity.

Getting lasting power of attorney has become simpler in recent years. Kite Consulting’s Rachael Madeley Davies explains why farmers should put it in place.

Putting a power of attorney in place could save your farm


ower of attorney (PoA) is a legal document which allows a trusted person to make decisions on your behalf, should you lose mental capacity. If no PoA is in place, family members have to apply through court, which can be long-winded and expensive, leaving the farming business in the lurch.

What does PoA cover?

There are two types of PoA. The first is about health and welfare.

This covers decisions regarding healthcare, medical expenses and last wishes. The other is in relation to finance and property, and includes business decisions. It is possible to have one PoA without the other, but it is good practice to get both. As a business owner, you should give the second option serious consideration. On a human level, it is a really good idea to get the health and welfare one as well. This is so critical medical care decisions

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are carried out in a way and by someone you want.

How does it work?

The document is flexible. It can come in to effect before or after the holder loses the mental capacity to make decisions. This could be from having a major accident, a stroke, dementia, or other event which affects mental capacity. For example, if you go in to a coma the document would kick


Power of attorney

in and when you come out it would stop again. These scenarios are already horrendous situations for a family to deal with, without the added uncertainty and expense of a legal process to secure the business.

How can I get a PoA?

Generally, people can organise lasting power of attorney themselves. The two forms are available on the GOV.UK website. Once downloaded, the documents need to be registered with the Office of Public Guardian. Farmers in England and Wales pay £82 for each form, with prices varying slightly in Scotland and Northern Ireland. Reductions are available according to income. If farms have a complicated business situation such as integrated land and property, seek legal advice to ensure the PoA is watertight in order to prevent disputes.

PoA should not be considered as an either/or with succession planning


somebody to step in and run the business if you are unable to do so. PoA should not be considered as an either/or with succession planning – rather a precursor to a wider plan about what is going to happen to the farm and its assets after it is passed on. Good succession planning should be highly integrated and multi-generational, whereas PoAs can often be a short-term solution during an emergency.

How should PoA fit in to good succession planning?

What are the common scaremonger stories By creating a lasting PoA, you associated with PoA? are setting up a mechanism for

The same types of stories are

always rolled out against PoAs: ‘Your children or your nephew or whoever could use it as a tool to put you out of the business before you are ready, or before any mental capacity issues’. These are simply not the case. Mental capacity is enshrined in statute under the Mental Capacity Act 2005 where it defines when an individual no longer has mental capacity. If you have PoA and it needs to be activated a ‘certificate provider’ (someone you have known for two years or someone with relevant professional skills such as a doctor, lawyer or social worker) makes the decision as to your mental capacity.

What age should I get a PoA?

Anyone over the age of 18 can get one. The key to this is to act early and to get one while you are still in control over what happens. If you leave it too long you surrender that choice. PoAs need to be amended if relationships or circumstances change and may be ended at any point. People can organise lasting power of attorney themselves, with the forms available on the GOV.UK website.

For more information, visit FGinsight.com/SYFF

Retirement/wealth modelling


Planning for retirement is one of the biggest barriers to getting succession sorted. ‘Lifetime wealth modelling’ is a new tool Gary Markham, of Land Family Business, is using to help. He explains more.

New tool helps to plan for retirement and succession


armers generally do not plan for retirement, and that is a big problem. There is a fear of the unknown, so people tend to just keep things as they are, hop on the tractor and get on with the day-to-day. But it is easy for successors to become demotivated if succession is the elephant in the room no-one wants to talk about. The anxiety of not knowing what is going to happen, whether they are building something for their future, or for their non-farming siblings, can build up. It also has ripple effects for their ability to plan their finances and invest in their futures.

What is wealth modelling?

Wealth modelling plots the future finances of individuals, families and businesses, to help them make better decisions about the future. With the help of an adviser, you input information about your current finances, how you expect this to change, and what you would like it to look like when you retire. From that, you can see what you

need to do now to have the retirement and succession you and your family want. This could be done with pen and paper but it is impossible to consider all the variables and how they interact. It is much easier and quicker using computer software, and we have developed a programme especially for this. First, we assume an age of death of 100, which most people are not likely to live beyond. Then we add information about the family business and personal finances, and variables according to what you hope to have and what could happen. This could include: • What level of income you will need and expect during retirement. • Farm profits and how this might change depending on externals such as Brexit and reduced farm subsidies. • Existing private wealth, including pensions. • Rental income from let property. • Current farm drawings. • Whether you want a successor to come into the business and live off it.

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It is easy for successors to become demotivated if succession is the elephant in the room GARY MARKHAM

• What your savings amount to,

what you can afford to save before retirement, and how much you will need to save. • Your potential Inheritance Tax liability. • What level of care you might need and want later. • Whether you will want a holiday each year.

Using modelling to make decisions

One of the biggest challenges is often whether the business can afford to fund more than one


Retirement/wealth modelling

Wealth modelling plots the future finances of individuals, families and businesses, to help them make better decisions about the future.

family. A son or daughter successor while single and living at home may be fine, but the business may not be able to fund another family unit and this is when the tension sets in and where the facts need analysing. The system then runs the

information through the model and shows the outcomes and what is affordable. It is then possible to tweak things to see how different decisions will impact the outcome. Running the model also highlights key areas for planning,

such as pension contributions, savings and tax liabilities. It is important to go through this process as a family by holding an annual general meeting and making sure every family member understands the situation and what will happen.

For more information, visit FGinsight.com/SYFF

Retirement/wealth modelling


Modelling a typical farming family LET us take a typical example of a 283-hectare (700-acre) arable farm with parents (aged 60). Child One is 25 and working and living at home, while Child Two is 27 and lives and works off-farm. The following questions are worrying the parents and are added to the model. ‘What ifs’ are tweaked to produce different outcomes: • What happens when Child One wants to marry or has a partner – if they move into one of the cottages the rent will be lost? • How can parents help Child Two to provide a deposit to purchase a flat where they work as they do not have sufficient savings? • Is it possible to share machinery with a neighbour? Will that release cash and what is the best use of this capital? • Should the business fund a rental property which could be left to Child Two. Will this have Inheritance Tax (IHT) liability?

Ultimately, when all of the variables are modelled and sensitivity analysis tested, the farming business is more robust financially, with succession discussed and agreed. Always ask for help from a financial adviser, pensions advisers and accountant.

Crunching the numbers The lifespan of a further 25 years for the parents was entered into the model and a couple of key questions considered. An independent financial adviser suggested the pension fund was £200,000 – take 25% (£50,000) tax free and consider using: • £25,000 for Child Two to buy a flat – initially shared ownership to retain an interest

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in the property until they are happily married •£25,000 to convert a building for rental after obtaining planning permission – this income is £15,000 which replaces £10,000 lost from Child One moving into let cottage – so £5,000 better off per annum Joint venture machinery sharing with a neighbour which will release £124/ha (£50/acre) in machinery and structured to have no tax balancing charges. This will release £35,000 capital – the options for this were: • Investing the money • Borrowing £80,000 through the farm in addition to the £35,000 to convert a farm building to a three-bedroomed cottage for rental – yield is 12% over cost and more than covers the borrowing repayments • The model proved it was best to borrow and develop the building and leave the cottage in their will to Child two at estimated date of death of 85. Being on the farm and run within the farming business, IHT should be managed. The financial scenarios suggest the remaining pension is left for now and reviewed in three years’ time, meanwhile parents continue to have drawings from the farm while the fund grows. The additional £5,000 per annum is invested in their pensions.



Key documents checklist


nowing which documents you will need when ill-health or death affects your

family can alleviate unnecessary stress at an already difficult time. The most crucial are lasting power of attorney, a will and

a partnership agreement, but others can also help in the process. Complete this checklist to find out which you need.

Lasting power of attorney

This puts a short-term plan in place to ensure businesses continue running and healthcare considerations are met in the event someone loses the capacity to make decisions.

Last will and testament

Wills should clearly outline somebody’s final wishes after they have died. They ensure assets and property are divided as per the wishes of the holder. Wills should also outline who will carry out these final wishes, as well as provisions for a funeral.

Partnership agreement

This legally outlines the parameters of the relationship between partners and the breakdown of equity and profit between the parties concerned and how it will look when one partner passes away.

Tenancy agreement

Outlines the terms of the tenancy and whether they allow for succession. It is critical you speak to your landlord and are aware of what will happen.

Transfer of deed

Used when property changes hands to update who is the owner. Transfer of deeds can be relevant to succession or be included as part of a partnership agreement.

Banking documents

Banks need to be made aware of business partners and have a plan in place for transferring financial control when someone dies.

For more information, visit FGinsight.com/SYFF

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Co-Op - December 2019 Booklet  

Co-Op - December 2019 Booklet