Real Family Finances

Taking over the family business

What you need to know when planning a successful hand over

Samuel Johnston, Chartered Financial Planner at NFU Mutual, says the issues facing Emily and Lucy Davis who want to take on their parents’ farm and caravan park business will be common to many families.

Emily and Lucy want to take over the reins of the business at a time and pace which their parents are comfortable with.

However, the sooner they broach the subject, the better.

Effective succession planning not only makes for a smoother transition, it can also help secure the future of the farm and business.

Family businesses are all unique so there is no right answer — the best course of action will be different for each family. This is why NFU Mutual Financial Advisers will look at the individual circumstances for each family when providing tailored financial advice.

For any family thinking about passing on the business to the next generation there are some key issues to consider:

  • Start planning early — it is never too early to start planning; the longer you leave it the fewer options you may have
  • Involve everyone — discussions should involve the whole family
  • Decide how and when succession should happen — many farmers and business owners are keen to see children take over during their lifetime, while others would rather hold on to it for life
  • Listen to each generation — a common sticking point is that younger family members may have a very different idea of how they want the business to run but don’t want to tread on their parents’ toes. The older generation might also be reluctant to embrace change. Talking and listening is the starting point to reaching suitable agreements
  • Handing over the running of the business doesn’t necessarily mean handing over ownership of the business assets at the same time
  • Make the most of the tax breaks available to farmers and business owners
  • Take advice — bringing in expert help, such as an NFU Mutual Financial Adviser, can give a different  perspective and guidance on the issues to consider.

If everyone sets out to get the best arrangement, not just for themselves but for the family group, then family meetings can really work.

There are plenty of challenges to cover as well, and again, specialist advice is the key to solving them.


The business must be protected against sudden illness or death of a key family member, and everyone involved should have valid wills, and where appropriate, written partnership or shareholder agreements. This will help ensure the business ends up in the right hands at the right time.

If giving away assets, it’s important to consider what would happen if any of the children were to divorce. Pre-nuptial agreements could help in this respect, although specialist legal advice is essential.

Treating each child fairly

It can be difficult for parents to decide who gets what, especially when there are children who are not involved in the family business. Fair does not always mean equal. Those who are involved in the business may deserve a larger share than those who are not.

Parents often want to make provision for non-business inheriting children. There are a number of options such as gifting non-business property or investments, or putting in place a whole of life insurance in trust that pays a tax-free lump sum on the parents’ death.

Because pension funds can be passed down on death, many farmers and business owners continue putting money in (and getting tax relief) with the intention of passing the fund Inheritance Tax (IHT) free to their non-business inheriting children.

Planning for retirement

Pension planning is key for everyone. The older generation can invest to generate retirement income so that they can afford to take less from the business, while younger family members could use their pension pots to buy farmland from the older generation via a Self-Invested Pension Plan. This in turn could provide parents with cash to help them enjoy retirement, or help other non-business inheriting children.

Being tax efficient

The family also needs to consider IHT and maximising the tax breaks available. Agricultural Property Relief and Business Property Relief can reduce or even eliminate IHT on qualifying assets.

There are other taxes to consider. For example, giving away assets can trigger a Capital Gains Tax charge but with the right advice the family would have a better understanding of their options and tax breaks available.

Don't forget

NFU Mutual Financial Advisers can help you and your family plan for the future. Find out more about our Financial Planning Service.