As the owner of a family farm, you’re not just running a business. You’re responsible for the future of the family’s legacy and the financial security of your nearest and dearest. You’re also the custodian of the land, livestock and environment that makes up your land.
So, do you have a plan in place for handing over this vital asset when you choose to retire?
With the [average age of Kiwi farmers now at 58 years old] (https://www.nzherald.co.nz/the-country/news/succession-rural-families-urged-to-consider-plans-for-who-takes-over-the-farm/AV3NCI3PQFC5VD4PBKUYWB26IE/), it’s important to think about succession planning and how the farm will be passed on to the next generation.
With the demands of running and operating the farm at the forefront of your mind, it can be a challenge to find time to work on the business, and to outline your future plans as a family. But having a [succession plan] (https://www.investopedia.com/terms/s/succession-planning.asp) is a critical part of your farm strategy and planning.
We’ve outlined five key areas you should have on your radar when it comes to getting a clear, workable and effective succession plan in place.
Family dynamics.
Sit down regularly to talk through the family’s plans for the farm, and the careers and aspirations of each family member that works in the business. This means addressing those [all-important family relationships] (https://www.farmtrader.co.nz/the-challenges-of-farming-on-couples-and-marriage-farm-advice/), expectations and facing any potential conflicts head-on to ensure a smooth transition.
Business valuation.
The farm is a critical business asset, so it’s important to get an [accurate valuation of the whole business.] (https://www.bnz.co.nz/business-banking/business-moments/how-to-value-your-business) This allows you to determine a fair and equitable transfer price to your successor, or to have a fair market price when selling up.
Financial planning.
The business you hand on needs to be financially viable, while also providing for your own retirement. You’ll need a [comprehensive financial plan] (https://www.bnz.co.nz/business-banking/business-moments/tips-for-farm-budgeting-and-planning) to cover retirement expenses, estate taxes and potential debt restructuring.
Legal and tax Implications.
Partnering with legal and tax advisers helps you avoid any major problems further down the line. Work with your advisers to understand the implications of [different succession strategies] (https://www.dairynz.co.nz/media/uymfsqo3/farm_succession_guide_v2-my-milk.pdf) and the impact they will have for you, your successor, the family and the business as a whole.
Retirement Planning.
[Develop a retirement plan] (https://www.farmersweekly.co.nz/opinion/how-to-retire-well-as-a-dairy-farmer/) for yourself and the current generation of family members. This means assessing your lifestyle considerations, personal retirement goals and the financial stability you and the family will need once they step back from the farm and ownership of the business.
Talk to us about developing a succession plan for your farm
If you’re nearing retirement and want to set the best possible foundations for your family farm, succession planning should be at the top of your to-do list.
Come and talk to the team about the best ways to value the farm, put together a financial plan and assess your retirement plans as the current owner of the farming business.
