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Succession planning has underpinned rural life for many centuries and is critically important to sustain the continuity of multi-generational farms.
Historically, rural succession planning was simple. When the parents decided they were ready to retire, the eldest son (typically) would take over the reins.
The other siblings would then receive the remainder of the estate assets, more often than not, of lower value.
The expectations of our society have continued to change, and the traditional method of farming succession is not always considered fair. But "fair" can have a different meaning between farmers and non-farmers.
Commercial assets can more easily be cut down the middle and divided in a fair and equal manner.
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For farmers, being able to keep the farm in the family as one economic unit for the next generation may be considered fair. For many farming families, it is not financially viable to simply divide the farm up for each child.
If succession is not complete during the parents' lifetime, NZ inheritance law in the modern context will not always support the farm (being the bulk of the estate) being inherited by only one child.
There is an obligation on parents to provide adequately for their children. Whilst this does not necessarily mean an equal division in everything circumstance, societal norms are increasingly dictating a more even split.
To enable a successful transfer of the family farm to the next generation, the business needs to financially support both the succeeding child and the retiring parents.
The primary consideration for any farming parents is to decide if they want one or more of their children to succeed to the farm. If the answer is yes, then the transactional matters of how and when that succession occurs will follow.
Family dynamics will determine whether the children should be included in the succession planning conversation, however regular family discussions from an early stage can help ease the process.
Each succession plan requires careful consideration of the individual family needs. No two farming families are the same.
We recommend talking to your lawyer, farm consultant, accountant or banker to help lead the succession project.
Regular reviews of your legal documents and ownership structure will help facilitate a hassle-free transition to the new farming generation.