Farm succession is a unique type of inheritance that has underpinned rural life for centuries.Succession is an important objective for many New Zealand farmers.This publication, prepared by MyMilk Ltd, summarizes a series of discussions held with New Zealand’s leading farm accountants, lawyers, bankers and advisors.It seeks to provide insight and advice that rural families will find useful as they prepare for farm succession.
Establishing a succession plan is critically important for the continuation and sustainability of a family farming enterprise. In the past, this was a relatively straightforward process.However, societal expectations have moved and what was once considered the appropriate way to pass on the family farm is no longer widely regarded as the most equitable manner to deal with the inheritance of family assets.
In previous generations, when the parents were ready to retire, the eldest son would typically take over the property.His siblings would receive other benefits generally of lesser monetary value.This was considered reasonable as it met the parents’ objective to keep the farm within their family.
However, expectations have changed and the way things used to be done is not necessarily regarded as “fair” by many in today’s society.
In the modern context, to achieve a seamless transition of the farm from one generation to the next, the family must focus on a number of important principles.These are:
» Have regular family discussions about succession from an early stage.
» The parents must provide strong leadership on the issues on succession.
» Farm succession must be understood as a unique form of inheritance which serves a farm owner’s desire to keep their farm in their family.
» Always aim to fully complete succession during the parent’s lifetime. Succession is not inheritance upon the parent’s deaths.
» Succession generally means one child inherits most of a farm.
» New Zealand law allows parents not to follow society’s expectations around equal division.
» Farmers should recruit an independent Advisor to lead their family’s succession project.
» The advisor should establish a strong decision-making team to assist them and the family.
» All family members must be provided with regular succession project updates.
» Review ownership structures and legal documentation immediately to ensure these will facilitate smooth succession.
» Put a succession plan in writing and commit to completing its actions on time.
This document explains these principles in more detail and describes a process to put them into effect.
Original source: farmsuccession.co.nz