Wealth retention needs to be the main aim

Wealth retention needs to be the main aim


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SUCCESSION planning should be focused on asset retention, not wealth distribution.

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SUCCESSION planning should be focused on wealth retention, not wealth distribution.

That is the thought of succession expert Geoff Tually, who says the farm succession culture presently established in Australia results in many family farms being "purchased" by each generation.

"I have never known any farm family to have a goal of leaving their children an inheritance instead of a viable family farm business opportunity," Mr Tually said.

"So why does this happen?

"We are seeing wealth distribution between family members rather than asset retention, and it does little for the family farm business but a lot for the non-farming children.

"The child who takes over the farm family business then has to borrow in an attempt to rebuild the farm business viability."

There needed to be a better way, Mr Tually said.

Working in the industry for 30 years has highlighted to him the common challenges of succession planning and the devastating impact bad planning has on relationships and the business.

"One farmer said 'In my local community I have seen the vast majority of family farms end up having their business base severely dented by succession issues, not to mention family relationships'," Mr Tually said.

"This is attributed to family not knowing how to effectively include off-farm children in the future plans and starting the succession journey late, when options become limited and the 'buy-out' option is popular.

"In many cases the parents feel they owe their children an inheritance," he said

"Parents leave it too long before thinking about how the farm business will be carried on and in many cases the parents are focused on making a living, or where they have bought-out siblings, are trying to rebuild the farm business."

Mr Tually said the effect of ownership by farm families was also affecting wealth retention in Australian agriculture.

"Land ownership has two value situations: one for providing security for the business years and secondly as a store of value, especially for use as collateral for loans," he said.

"This second value aspect may cause the family confusion at the time of transfer of the family farm to the next generation.

"For farm succession the focus should be on the business and wealth retention, while inheritance focuses on asset value and wealth distribution.

"It is difficult to use the family assets for business growth and wealth distribution at the same time."

However, he said business growth was possible where children wanted to build on what their parents had established and wealth could be distributed over time through the use of trusts.

"Why do parents feel they owe their children an inheritance?" Mr Tually said.

"What's wrong with providing them opportunities?

"There are many options available."

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