The future of the farm: How important is rural family succession?

Do you own a rural property or have relatives who do? Is family succession already in your planning?

Although many consider the subject to be a sensitive one, the truth is that it ensures more security for the assets that belong to you and your loved ones.

When planning the transmission of an agribusiness in advance, there is more awareness about the future of the farm. Thus, this generates tranquility for those involved and less emotional stress among the heirs.

Despite being very relevant, this is a care that is not on the producers’ radar. So, do you want to understand why? Next, we will address the main challenges of rural family succession. Follow along and understand the importance of overcoming them and the ideal ways to do so.

What are the main challenges in rural family succession?

It is enough to observe the reality of the rural area in Brazil to realize how succession is still little discussed, or even planned in an inefficient way. In the country, the vast majority of agribusinesses are family-owned, but few remain so through the generations.

To give you an idea, while more than 80% of the active enterprises in the field are led by their founders, 41% are run by people from the second generation. Only 16% are from the third generation. Meanwhile, 1% belong to the fourth generation onward.

The data were released by the portal O Presente Rural. They reinforce that the culture of rural family succession is not yet solid in the country, even though the idea that farm business is passed on “from father to son” is a big one.

Lack of planning often occurs because families don’t know when to start planning for business continuity. In fact, this is a delicate and complex subject. Thus, many end up postponing the discussion until it is too late to have it.

In addition, many patriarchs are resistant to dealing with the subject of their deaths. There are also cases of conflicting family relationships, lack of trust in heirs, or successors who are simply not interested in agribusiness.

Why is family succession planning so important?

Overcoming all the challenges mentioned above starts from the same point: You and your relatives need to be aware of the importance of family succession and understand how it can benefit everyone involved.

First of all, nobody wishes death. However, it is inevitable. So if your approach is clear and straightforward, you can avoid even greater stress and frustration when a fatality occurs.

Thus, with good communication, the transfer of assets will be more conscious and secure. Added to peace of mind, good planning can also reduce the tax burden in the Tax on Transmission of Property Causa Mortis and Donation (ITCMD).

Once the heirs have been defined, they can be better prepared to take over their duties. This is the best way to ensure that the business continues and continues to bear fruit for the next generations.

Even when there is no interest or vocation of the heir to remain in the rural segment, the rural family succession is still valuable. After all, it advances the preparation to assume the role of shareholder, for example, which is also a way to do justice to the value of the business.

How to start planning the best way?

The starting point for a successful family succession is to define frankly what will happen to the property once the current owner passes away. This decision usually involves the interests of the heirs.

This is because it will need to be stipulated whether the farm will still be family owned. It may be that the younger generations prefer to have shareholder control only, with a third party handling the management of their operations.

Thus, if the agribusiness remains in the family, planning must involve rules for the heir’s entry into the business.

And, this involves the transfer of ownership, the division between leaders and representatives, among other issues that ensure a smooth and well-defined change.

But if it is decided to hire external managers on the property, the protocols stipulated in the family succession must anticipate different points. This involves, for example, which heirs will remain owners, which will become shareholders, advisors, etc.

In all cases, remember that this type of plan also involves family egos and emotionally charged discussions. To ensure the impartiality that decisions require, it is recommended to hire a mediator to guide the entire process.

Just as important as planning the succession of a rural family is knowing what to expect for the future of agribusiness. In the article in this link, we discuss the main projections for the sector until the end of the year. Access it and make even more conscious decisions in the management of your property.