Succession and achieving financial security for the exiting generation
Farmers stepping back or out of their farm into retirement need financial security.
However taking action without establishing their financial needs is not a succession plan… but potentially a financial sacrifice!
So what is financial security? In a nutshell, achieving financial security ensures that the exiting generation has the means to meet their financial needs for the rest of their lives.
“It’s not only about considering the weekly groceries and electricity, or planning holidays and travel, but possibly the cost of living arrangements away from the farm and probably the ever-increasing need for some form of supported living or aged care,” says Carrick Aland Succession Specialist Wayne Turner.
“Quantifying the future financial security of those exiting delivers a desired capital sum or an ongoing income stream target amount that they can then plan toward providing.”
Financial security is one thing; financial independence (from the farm) is another.
The distinction leads to different ways of structuring the financial arrangements that lie at the core of any succession plan.
“Ideally we seek to insulate exiting parties from any business risk and seasonality associated with ongoing farming operations. Attaining financial independence provides retirees with the freedom to make lifestyle choices, unconstrained by the seasons being experienced,” said Wayne.
“The gold standard approach is to set aside a capital sum that is invested and drawn upon independently of farming fortunes for those exiting the farm.”
A structured approach to financial independence not only adds a layer of financial comfort and confidence for retirees but enhances future family relationships.
“For the succeeding farmers, attaining financial independence for the exiting party goes a long way toward attaining true management independence.”
About Wayne Turner
With over 35 years’ experience consulting to and advising rural families in the areas of accounting, taxation and financial services, Wayne Turner proactively assists in achieving the successful intergenerational transition of rural family businesses and their related assets.
Contemplating the future needs of each generation, along with viable finance and business structuring, Wayne seeks to gain ongoing certainty for those exiting as well as those continuing the farming enterprise, whilst upholding harmonious family relationships.
With a sharp focus on gaining a true understanding of each family’s objectives, together with a strong appreciation of the individual and financial dynamics that impact their realisation, Wayne is well-equipped to facilitate and formulate no-nonsense strategic succession solutions.
Carrick Aland is Business Advisory Firm of the Year and previously Boutique Firm of the Year (2021), Multiservice Firm of the Year (2020) and SMSF Firm of the Year (2019).
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