Guy and Philippa Lee bought Sandystones Farm, near Jedburgh in 1990. Over the years they have grown the business and now manage a heavily diversified family farm. During that time, they brought up their three children who all enjoyed life in the countryside. As they grew older, their two daughters moved away from home and began their own successful careers. Their son, Hugo, shared his parents’ interest in farming and after gaining experience elsewhere came home to manage the family business. This allowed Guy and Philippa to plan their retirement and pass the farm on to the next generation.
With this in mind, they approached their chartered accountant, Darren Thomson from Douglas Home and Company, to discuss the future of the business. Darren has over 25 years’ experience in tax planning and has helped many clients with their succession, therefore providing expert guidance for the Lee family.
Darren began the process by creating a ‘Family Bible’. This comprehensive document outlined their main taxes, such as Inheritance, Capital Gains and Income Tax, and allowed him to show how they could improve their position across the different areas. Once the ‘Family Bible’ was complete, Darren moved onto the main succession plan.
Guy, Philippa and their three children were all involved in the conversation regarding the business succession. Darren led a family meeting as a mediator and impartial chairperson, to shed light on potential future scenarios and ensure each member clearly understood the final plan. As their son, Hugo, was the only child who had chosen a career in farming and while their two daughters working in other businesses, this resulted in Darren explaining that succession is usually unequal but fair. If each of the three children were to end up with an equal amount of money or assets, it could result in the business being broken up and the farm potentially being sold, this outcome that was not desired by any of the family members. Therefore, with guidance from Darren, a plan was created which resulted in Hugo becoming the main business successor so he could continue running the farm and the two daughters would be helped indifferent ways in the future.
“Each family has individual circumstances and therefore the way to help the children who do not have any involvement in the farm can be different for each case.”, said Darren. “Some examples of what you can give these members include gifting them property, setting up a ‘life-time insurance’ where a sum of cash is payable to those children upon your death or building up a pension fund for them. As this is discussed through the succession planning process, each non-farming family member should understand their own inheritance”.
Following the work with Darren, Guy and Philippa are now on the road to retirement with the knowledge that the family farm is secure for another generation. This allows Hugo to maximise the business by continuing to grow and diversify working side-by-side with his parents.
Guy said, “We appreciated Darren’s personal approach and the time he took to really understand our family. Having him visit our farm for meetings and knowing he was able to be contacted at any time if we had questions made it feel like he was an extension to our own business. This resulted in a smooth succession planning process.”
“Succession is not an easy subject to broach, but it shouldn’t be avoided and is certainly easier to start the conversation sooner rather than later”, added Darren. “Once a plan is in place, you will gain great peace of mind knowing there will be a smooth transition of passing the farm to the next generation when the time is right”.
If you would like to contact Darren for advice about succession planning or other accountancy and tax questions, please call 01573225082 or email firstname.lastname@example.org