Succession planning a major challenge on Kilkenny farms
One of the most comprehensive farm surveys ever undertaken in Ireland has found that succession planning continues to be a huge issue for Kilkenny farmers.
Farm incomes are low, with profits often relying on subsidies, and farm families requiring off-farm income to support their households, a trend that has been growing steadily year on year. It is not surprising, therefore, that concern about viability is the top reason farmers cite for not having a plan. However, although they are cash poor, average land value across Ireland is around €9,072 per acre, potentially putting the value of a 33 hectare farm at circa €740,000, depending on the region.
Without a plan, you could be lining up substantial costs for yourself and your successor where assets of this value are being transferred. Planning ahead allows you to avail of reliefs that can enable farmers to transfer assets to family member’s tax free.
The first step in succession planning is to clarify your wishes, taking into account whether or not you have a successor, whether you want to continue to be involved in the farm, and what financial provision you need to make for yourself and other family members.
Issues that need to be considered include:
Another important consideration is the Fair Deal Nursing Home Scheme. Under this scheme, 7.5% of the value of the farm must be set aside annually to fund nursing home fees. A change in the treatment of family farms and businesses has been proposed which, if enacted, will introduce a three-year cap on contributions taken by the State to fund care costs provided that a family successor continues to operate the farm or business for six years.
Ifac’s research found that one in five respondents have identified a successor but not yet formalised their succession plan. Keep in mind that having a vague idea in your head, without documenting it, is lining up problems for yourself and your successor. Overall, an overwhelming majority of respondents do not have a formal succession plan, suggesting there is much to do to secure the future of Irish farming. Now is the time to get started on your plan.
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