Succession planning has a vitally important part to play in the long-term future health of any farm. And it's never too early to start. By Kevin Deane, director of Harcourts Kevin Deane Real Estate and rural sales consultant.
Thinking about what happens to the family farm after you’ve retired or passed away is not always an easy thing. It is, however, an essential thing.
As with any small business, sound succession planning will allow your farm – or vineyard, or orchard – to grow and continue to reap the benefits of all your hard work. It also means you can ensure you keep the dividing of your assets fair and equitable, as is required by law, and most importantly, you can try and avoid distressing family conflict.
While many Kiwi farmers are aware of the need for a succession plan, most of those I’ve spoken to have said they wished they’d started the process much earlier. It’s really never too early to begin. What you don’t want is to have to come up with a plan in a rush if ill-health or age start to make themselves felt unexpectedly.
The first step is to decide what your ideal succession plan would look like and then talk to all the family members and other parties affected. Do all your children expect an equal share of the property? Would some of them prefer other assets instead? Does one of your offspring work much more on the property than others? Is it feasible to section off parcels of land for different beneficiaries? Would it be simpler and more preferable to sell all assets and divide the return equally?
The other crucial aspect to be considered if your succession plan is triggered by retirement, is how much income you and your spouse will need to live on – and where will that come from?
The more you talk about all aspects and eventualities of a succession plan, the fewer surprises there will be when the plan is actioned, and the less likelihood of upsets and the need for legal action.
Once you have a good idea of what you’d like to happen, and your family are aware of it and on board, it’s time to call in the professionals. That means the solicitors, accountants and, in these days of inter-generational debt, the bankers. Talk to them about what you’d like your succession plan to look like, and they’ll work with you to determine if and how it can be structured accordingly. They may well be able to suggest other options you hadn’t considered to achieve your desired result.
And as you would with a standard will, don’t just create a plan then lock it in a safe to be dusted off at the critical moment. Think of it as a living document: family circumstances can change; the original beneficiaries may no longer want to take over; debt levels and assets change. I’d take your plan out and review it once a year to make sure it’s relevant and practical for the current circumstances.
In all aspects of succession planning transparency is the key. This is true for any small business, but particularly true for dividing or selling the family farm when tensions can escalate and become very emotional very quickly. If everybody is across the plan and nobody feels blindsided, you should secure a healthy, long-term future for both your family and your business.