Farm succession is a unique type of inheritance that has underpinned life in Ireland for centuries and requires careful planning.
While there is often the belief that a son or daughter will take over the farm business, it is important that the discussions around succession or inheritance take place to confirm this.
“It can be a difficult conversation to initiate but it is very important to provide clarity and avoid potential stresses and uncertainty relating to the future of the farm,” says Donal Whelton, head of agriculture at AIB. “Communication is key and it is important that all family members are aware of the future plans, including those who may not be directly involved in the day-to-day running of the farm. All of us who are engaged in the sector are aware of the ageing profile of Irish farmers.”
The Census of Agriculture 2020 shows that more than half of farm holders are 55 or older. A third (33 per cent) of farmers are aged 65 or over (up from 20 per cent in 2000), with just 7 per cent of farmers aged under 35 (down from 13 per cent in 2000). However, this situation is not unique to Ireland, with the average age of European farmers also increasing.
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Research carried out by Ipsos MRBI on behalf of AIB in 2021 showed that 25 per cent of farms are due to be transferred in the next 10 years, 74 per cent of which have identified a successor. Where a farm successor is identified 71 per cent are actively engaged in the day-to-day farming activities, while on 57 per cent of farms the successors are actively involved in the decision-making process of the farm.
“Collaboration is key when it comes to farm succession planning and the process works best when it includes discussions between several important stakeholders – including the family itself, farm advisers, financial advisers and solicitors,” says Whelton. “There are three important areas to focus on when sustaining your farm for future generations: planning, communicating and availing of the support of advisers.”
A plan is critically important
Establishing a succession plan is critically important for the continuation and sustainability of a family farm.
“There are important decisions to be made that go beyond passing the baton to a son or daughter,” says Whelton. “Such as, will the farm have the income-generating potential to meet the needs of the successor? How can you ensure the retirement goals and cash-flow needs of the existing farmer are met?
“Are there any other family obligations that need to be met – college payments or sites for houses that need to be agreed? The transfer of the farm business is a very personal decision and every family has a different set of circumstances, which means good communication is key. Potential challenges can be avoided if plenty of time is invested in the planning process.”
A delicate subject for some families
It is good to talk about succession and create a positive culture in the family around it, as it can often be a very delicate subject for some farming families.
“It is important that the succession plan is communicated to all the family so everyone is clear and all parties know where they stand,” says Whelton. “Family involvement and open conversation is important to avoid potential disagreements later on.”
If discussion within the family is challenging, an adviser can play a part in assisting with succession, Whelton adds.
Objective advise can help
“There are a lot of items you have to work through with succession, including taxes and legal issues, but often you might need to start with an agri adviser or succession specialist to open up discussions on succession,” says Whelton. “This objective person can present everyone’s opinions and aspirations, so that each family member can better understand what each other’s goals are, and the role they want to play.”
It is important to have financial and legal conversations early and to avail of all the incentives, some of which may come with specific conditions, Whelton advises.
“Pay attention to taxes and maximise reliefs but try not to become so focused on this that it becomes a barrier to what is right for you and your family when it comes to farm transfer.”
It is clear from the above-mentioned research that a lot of Irish farms will transfer in the coming 10 years – 25 per cent; almost 34,000 farms.
“It is important that the sector can continue to attract and maintain young, educated, well-trained people for the sustainability of food production in Ireland,” says Whelton. “However, it is more important that succession is managed and communicated correctly on each individual farm to ensure that the farm can be sustained into the future and the goals and expectations of all family members are met.”
Please see AIB’s family business webpage for more guidance on your family business journey or speak with one of AIB’s agricultural advisers in your area. https://aib.ie/business/sector-expertise/family-business.