Farming succession is the organised, systematic and structured transfer of the family farm to the next generation. This process may take place over many years and ideally starts when the farm owners are in their late fifties.
In retirement, a balance is required in order to achieve:
- financial security, retaining some capital while reducing physical input into the farm, and
- financial dignity, while still having input on farm decisions but reducing this over time.
The succeeding family needs the certainty they are progressing into a viable farm business and have “skin in the game”. Non-farming children may question any financial inequality and some may wish to retain a minority financial interest in the farm, so consideration needs to be made for this.
For successful farm succession the business needs to support two families and be profitable enough to provide an off-farm investment to secure a comfortable life for retiring parents. This is often easier to do with the cash flow and profit in dairy than that of lower income traditional farming.
It is advisable for farming parents to find and appoint a head adviser to manage their team of professional advisers and keep the succession process moving along. Saying “we need to look at succession” each year to your family accountant usually results in the comment, “in 12 months’ time”. Few professional advisers really understand the process and it often needs a fresh perspective by outside specialists brought in to do the job. The process can take several years and needs all parties to understand their part and responsibilities.
A good start in this process would be to read an informative book by Ian Blackman entitled Keeping Farming in the Family. This details practical case studies and is designed to create family discussion to start the process. Ian’s practice, Blackman Spargo, is a specialist rural law practice and Ian has farming succession clients throughout New Zealand.
Keeping Farming in the Family, by Ian Ross Blackman and Malcolm Evans, ISBN: 9780473200206
Your Last Fence Post, by Joan Baker, available from the author at email@example.com
BlackmanSpargo, Rural and Commercial Law, http://rurallaw.co.nz/