Passing the farm down to the next generation is ingrained in the psyche of many NZ farmers, particularly those inter-generational farmers.
Prior to the 2000’s, completing farm succession was a reasonably stress free exercise. Modest land values and average farm income, coupled with many of the farm children preferring to seek their opportunities elsewhere in the big city made the pathway for the succeeding farm child/children reasonably smooth.
Over the past 20 years however, significant increases in farm values has led to farm succession becoming a great deal trickier. The inability for the succeeding farm child to borrow any meaningful amounts of money against the farm to pay out the parents and siblings has resulted in many parents having to face up to the prospect that a significant portion of the farm will need to be gifted to the succeeding farm child while the non-farm children may have to wait for many years before they can receive any sort of inheritance.
The emergence of social media in this space is not making life any easier for parents either, where non-succeeding farm children all over the country are beginning to share their views on farm succession and in particular their concerns that farm succession should be equal or very fair, and not heavily in favour of the succeeding farm child.
This inability for parents to be able to treat their children equally in almost all situations now is causing a great deal of anxiety for parents which in turn is causing procrastination in the planning for farm succession. Furthermore potential relationship property issues/risks between the succeeding farm child and their partner/spouse can complicate the plans.
No wonder the average age of farmers continues to creep up year on year and over 25% of farmers are now considering selling up as their preferred option for farm succession, whilst also alleviating their stress levels due to the ever looming farming headwinds relating to climate change, rising farm costs and scarcity of farm labour.
Farm succession planning in NZ is quickly becoming a very modern concept which is changing all the time and farmers need to keep up with the play if they wish to ensure a smooth transition within the family. Farmers can start the process by talking to their most trusted advisors, usually their lawyer, accountant, bank manager or farm advisor. There are also good farm succession coaches who can be very helpful for farming parents to get their planning underway.
If farmers are hoping to pass the farm down to the next generation, they are going to need to fortify themselves, take great professional advice, plan as early as possible with their children and keep an open dialogue going year on year. The farm succession plan needs to be transparent for all family members and needs to keep moving. It is never too late. This decent planning and the setting of probable expectations amongst family members will hopefully assist farming parents to successfully implement farm succession while ensuring that the family continue to enjoy themselves together at Christmas.
If you have any questions please get in touch with our team of rural law experts.