FFF insight 17 - Farm Succession Planning: Why Farming Families Put It Off

If Succession Is So Important, Why Don’t Intelligent, Successful Farming Families Act? 

Farming families make complex decisions every day. 

They manage multimillion-dollar assets, make decisions about crops, livestock, land, machinery, finance, employees and risk, and regularly invest significant amounts of money today based on what they believe will happen tomorrow. 

Most farming families also understand that farm succession planning will eventually involve one of the most important financial, business and family transitions they will ever undertake. 

So why do so many put it off? 

We regularly hear: 

“We don’t have time.” 

“We don’t know where to start.” 

“We’re not ready yet.” 

“We started, but got stuck.” 

“We’ll deal with it after harvest.” 

Perhaps the answer is not a lack of intelligence or capability. And it is certainly not because farming families don’t care about their family or the future of the farm. 

Perhaps the answer is much simpler. 

We’re Human. 

Human beings don’t always make decisions based purely on what is logically most important. 

Our behaviour is influenced by how immediate something feels. We tend to respond strongly to things that provide a reward now. We also respond strongly when there is an immediate problem, threat or consequence. 

But when the reward is years away — or the consequences of doing nothing may not appear for years — it becomes much easier to delay. 

And farm succession fits that pattern almost perfectly. 

 

Pain, Pleasure and Why We Act 

At its simplest, human behaviour is strongly influenced by two forces. 

We are motivated to move towards things that feel rewarding, and we are motivated to move away from things that feel painful, risky or threatening. 

In simple terms: 

Pleasure pulls us forward. 

Pain pushes us forward. 

The difficulty with succession is that both can often feel a long way away. 

The rewards from getting succession right may not be fully realised for five, ten or even twenty years. And the consequences of doing nothing may not show up today either. 

So we procrastinate. 

 

There Is Some Science Behind This 

Behavioural science gives us a useful way of understanding why this happens. 

Present bias means we naturally place greater importance on something happening today than something that may be considerably more important in the future. An immediate reward can feel more valuable than a much larger future benefit. 

Temporal discounting means that the further away an outcome is, the less important it can feel today. A financial benefit worth hundreds of thousands or even millions  of dollars in the future can struggle to compete with the problems demanding our attention this afternoon. 

Then there is avoidance. If something feels difficult, uncertain, emotional or uncomfortable  and there is no immediate consequence for putting it off, delaying it can feel easier than dealing with it. 

Farm succession planning can contain all of those ingredients. 

There are questions about family, money, ownership, control, fairness, retirement, tax, structures, the next generation, non-farming children, death and relationships. 

And sometimes the possibility of conflict. 

It is hardly surprising that families delay. 

“We Just Don’t Have Time” 

This is one of the most common things we hear from farming families. 

And farming families are genuinely busy. 

There is always something happening. Livestock need attention. Crops need managing. Machinery breaks down. Weather changes plans. Staff need managing. Finance needs organising. And family life continues in the background. 

But consider this. 

Imagine the local fuel distributor rings this afternoon and says: 

“I’ve got four tickets to the footy this weekend. We’re in a corporate box. Food and drinks included. Would you like them?” 

What happens? 

There is a fair chance the family suddenly finds a way. 

Someone else feeds the stock. A job gets pushed to Monday. Plans get reorganised. Someone leaves a little earlier. 

And off we go. 

Suddenly, We Have Time. 

Why? 

Because the reward is immediate, clear, certain and enjoyable. 

That doesn’t mean the family is irresponsible. It simply demonstrates something about human behaviour. 

Perhaps the problem is not always: 

“We don’t have time.” 

Perhaps the problem is: 

The Reward From Succession Feels Too Far Away. 

Why Farm Succession Planning Often Loses the Battle 

Think about the comparison. 

 

The Corporate Box 

Invitation today → Clear reward → Immediate enjoyment → Certain outcome → ACTION 

Now compare that with succession. 

Farm Succession Planning 

Start today → Difficult conversations? → Advisers? → Decisions? → Costs? → Uncertainty? → Potential conflict? → Benefits sometime in the future? → MAYBE NEXT YEAR 

When we look at it this way, procrastination begins to make sense. 

It is not necessarily that succession is unimportant. The opposite may be true. 

It may be so important, complicated and uncertain that doing nothing today feels easier than starting. 

But there is a danger in waiting. 

The problem with succession is that by the time the pain becomes immediate, some of your best options may already be gone. 

The trigger might be a health event, a death, a relationship breakdown, a family disagreement, a change in legislation or financial circumstances, a next-generation family member deciding to leave, or a sudden need for Mum or Dad to step back. 

It could even be a forced sale. 

Suddenly succession is no longer something that can be dealt with tomorrow. 

It must be dealt with today. 

And when that happens, the family may have fewer choices. 

 

What If We Focused More on the Reward? 

A lot of discussion about farm succession focuses on what can go wrong. 

What happens if Dad dies? What happens if the children fight? What happens if tax laws change? What happens if the farm has to be sold? 

Those risks are real, and sometimes pain is what finally forces a family to act. 

But we don’t think farming families should have to wait for something to go wrong before dealing with succession. 

There is another, much more positive reason to act. 

 

The Reward Can Be Enormous 

For many farming families, succession will be one of the most financially significant processes they ever undertake. 

We are often dealing with farming enterprises worth millions — and sometimes tens of millions — of dollars. 

Getting succession right can therefore have financial benefits measured not simply in thousands of dollars. 

In Some Situations, the Difference Can Be Millions. 

Depending on the family’s circumstances, getting succession right may mean accessing valuable capital gains tax and stamp duty concessions or exemptions, identifying restructuring and superannuation opportunities, establishing better ownership structures, reducing financing and interest costs, avoiding unnecessary transaction costs and preventing poorly timed or forced asset sales. 

Across a multimillion-dollar farming enterprise, these are not necessarily small numbers. 

Good succession planning can also help preserve something that has often taken several generations to build: 

Family equity. 

But there is another financial benefit that is much harder to see. 

The Costs That Never Happen. 

The legal dispute that never occurs. 

The mediation that isn’t required. 

The court case that never begins. 

The professional fees that aren’t incurred trying to resolve a family dispute. 

The business disruption that doesn’t happen. 

The unnecessary borrowing that is avoided. 

The forced sale that never needs to occur. 

The family equity that isn’t lost. 

When millions of dollars of family wealth are involved, the difference between a well-planned succession and a poorly planned one can potentially be millions of dollars. 

And yet, even that only tells part of the story. 

 

What About the Things We Can’t Put a Dollar Value On? 

What is it worth for Mum and Dad to have confidence about their financial future? 

What is it worth for the farming children to know there is a genuine opportunity ahead? 

What is it worth for the non-farming children to understand the thinking behind the plan? 

What is it worth to have expectations discussed while Mum and Dad are still here to explain their thinking? 

What is it worth to avoid years of uncertainty? 

What is it worth to avoid brothers and sisters falling out? 

What is it worth to protect the relationship between parents and children? 

What is it worth for grandchildren to continue having relationships with their cousins, aunts, uncles and grandparents? 

And perhaps one of the simplest measures of all: 

What Is It Worth to Still Have the Whole Family Sitting Around the Table Together at Christmas? 

There isn’t a spreadsheet that can calculate that. 

There isn’t a tax concession we can put against it. 

There isn’t a valuation we can obtain. 

Some outcomes are simply: 

Priceless. 

Successful farm succession should preserve more than wealth. 

It should seek to preserve family, relationships, opportunity and legacy — the very things that made the wealth worth preserving in the first place. 

 

The Reward Is Both Financial and Personal 

When we talk about the potential reward from getting succession right, there are really two sides. 

The financial reward can potentially include millions of dollars of family equity preserved, tax and stamp duty concessions or exemptions, unnecessary costs avoided, better structures, more sustainable funding arrangements, financial security for Mum and Dad and a financially viable farming enterprise for the next generation. 

But the non-financial reward can be just as important. 

Better communication. Clearer expectations. Greater confidence. Reduced uncertainty. More choices. Less pressure. Better-prepared next-generation leaders. Family relationships protected. 

And hopefully: 

A Family That Can Still Sit Around the Table Together at Christmas. 

Can you put a value on that? 

Imagine Being Succession Ready™ 

Imagine being able to say: 

“We know where we are today.” 

“We understand our options.” 

“We’ve had the important conversations.” 

“We know what Mum and Dad need.” 

“We understand what the next generation wants.” 

“We understand the major financial and tax issues.” 

“We’ve identified the risks and opportunities.” 

“We know what still needs to be worked through.” 

“We have a Succession Blueprint™.” 

“We know what to do next.” 

That is what it means to become Succession Ready™. 

It does not necessarily mean the farm has been transferred, Mum and Dad have retired or every final decision has been made. 

It means the family has started moving from: 

Uncertainty → Clarity 

Confusion → Direction 

Avoidance → Conversation 

Fear → Confidence 

Procrastination → Progress 

That is the first major destination. 

 

So Why Don’t We Just Do It? 

If the potential financial reward can be measured in the millions... 

If Mum and Dad can achieve greater financial security... 

If we can create opportunities for the next generation... 

If we can protect family relationships... 

And if we can increase the likelihood of everyone still sitting around the table together at Christmas... 

 

Why Wouldn’t We Do It? 

Because between where we are today and where we want to be there is a gap. 

And that gap is filled with uncertainty. 

Where do we start? 

What if we get it wrong? 

What is fair? 

What will the kids think? 

Will this create conflict? 

What will it cost? 

What about tax? 

Are Mum and Dad financially secure? 

Who should own the farm? 

Who should control the business? 

How do we treat the non-farming children? 

What if circumstances change? 

When all of those questions appear at once, the gap can look enormous. 

 

The Traditional Approach Can Make the Gap Even Bigger 

The traditional approach to farm succession planning can sometimes feel like one enormous leap. 

The family knows it needs to do something, so it begins the succession process and can quickly be confronted with some very big questions. 

Who gets the farm? When does ownership transfer? What structures should we use? What is fair? What happens to the non-farming children? What does Mum and Dad retain? What legal documents do we need? What are the tax consequences? What happens when Mum or Dad dies? 

These are all important questions. 

But Sometimes We Are Asking Them Too Early. 

The family may not yet have the knowledge, understanding, communication or confidence required to answer them. 

We are effectively asking the family to jump from: 

“We know we need to do something.” 

straight across to: 

“Here is our final succession plan.” 

That is a very big leap. 

Some families make it. 

Others become overwhelmed, start and stop, spend considerable time and money but make little progress, or become stuck between different advisers and different family expectations. 

Sometimes relationships are damaged. 

And some families simply decide: 

“This is too hard.” 

So they go back to doing nothing. 

 

You Don’t Have to Make the Leap 

We believe there is a different way. 

Instead of asking a farming family to make one enormous leap, we can provide a series of small, logical and manageable stepping stones. 

Step 1 — Understand 

Where are we today? 

Understand the family, the farming enterprise, the assets, the structures, the people and the starting position. 

Step 2 — Learn 

What do we need to understand? 

Build the knowledge required to make better succession decisions. 

Step 3 — Communicate 

What conversations do we need to have? 

Understand expectations, concerns, aspirations and differences before trying to solve them. 

Step 4 — Explore 

What are our options? 

Explore what could work, what may not work and the financial, family, tax and structural implications. 

Step 5 — Blueprint 

Where do we think we’re heading? 

Bring everything together in the Succession Blueprint™. 

Identify what has been agreed, what remains unresolved, what professional advice is required and what happens next. 

Then the family reaches an important milestone: 

Succession Ready™ 

The succession journey may not be finished. 

But the family is prepared to move forward. 

And from there, the detailed professional work of BUILD and SECURE can begin. 

 

Bring the Reward Forward 

This brings us right back to human behaviour. 

If the only reward from succession sits ten years into the future, procrastination is easy. 

So Let’s Bring Some of the Reward Forward. 

Instead of one enormous distant outcome, we create a series of smaller achievements. 

Complete the Benchmark. 

We understand where we are. ✓ 

Complete the Family Enterprise Map. 

We understand what we have. ✓ 

Learn something important. 

We understand our options better. ✓ 

Have the first family conversation. 

We understand each other better. ✓ 

Identify an opportunity. 

We can see some value already. ✓ 

Resolve an issue. 

We are making progress. ✓ 

Develop the Succession Blueprint™. 

We know where we are heading. ✓ 

Become Succession Ready™. 

We are ready for the next stage. ✓ 

Each step creates progress. 

Each step reduces uncertainty. 

Each step provides a sense of achievement. 

And each step makes the next one easier. 

 

When Should You Start Farm Succession Planning? 

The best time to start farm succession planning is generally before you need to make the final succession decisions. 

You do not need to know today who gets the farm, exactly when ownership will transfer or what the final business and ownership structures will look like. 

Starting earlier gives your family something incredibly valuable: 

Time and Choices. 

Time to understand your current position. 

Time to learn. 

Time to communicate. 

Time to explore different options. 

Time to identify financial, tax and structural opportunities. 

And time to make decisions before circumstances make those decisions for you. 

You don’t need to be ready to complete succession. 

You Need to Start Becoming Succession Ready™. 

 

One Step Is Better Than No Step 

Starting farm succession planning does not mean deciding who gets the farm. 

It does not mean transferring land tomorrow. 

It does not mean Mum and Dad have to retire. 

It does not mean signing legal documents. 

And it certainly does not mean resolving every family issue today. 

Starting simply means taking the first stepping stone. 

Understand where you are today. 

Then take the next step. 

Then another. 

You Don’t Have to Make the Leap. 

You Just Have to Start Moving. 

Where are we today? 

Where are we going? 

What do we do next? 

That is how farming families move from uncertainty to Succession Ready™. 

Ready to Take the First Step? 

You don’t need to have all the answers. 

You don’t need to know who gets the farm. 

You don’t need to have your farm succession plan worked out. 

And you don’t need to make the leap. 

You just need to take the first step. 

Join us for our complimentary webinar: 

A Different Approach to Farm Succession 

Understanding Succession & Becoming Succession Ready™ 

In this webinar, we’ll help you understand why farm succession planning can be so difficult to start, where your family should begin, the foundations that should be in place before making major decisions, and the financial and non-financial opportunities that can come from getting succession right. 

Most importantly, we’ll show you a different approach to moving your family from uncertainty towards becoming Succession Ready™. 

Whether you haven’t started, don’t know where to start, or have already started and become stuck, the webinar is designed to help your family answer three important questions: 

Where are we today? 

Where are we going? 

What do we do next? 

You don’t need to solve succession today. 

But You Can Take the First Step Today. 

Register for our complimentary webinar → 

When you register, you’ll also receive our complimentary 30-page Farm Succession Webinar Guide, including 8 real-life succession examples. 

A Different Approach to Farm Succession 

Family-led. Adviser-supported.