A farming couple in their late 50’s farmed two properties in partnership with their 2 married sons, aged 32 and 30. A 28 year old daughter was working as a graphic designer after completing her degree. The parents and one son on one property owned by the family for three generations, and the other son lived on the second farm that been purchased 4 years ago because it offered development potential, was 40 km away.

Ownership of the home farm was in a partnership of the two parents, while the second property was owned by a Family Trust formed at the time of purchase. Stock and plant and the trading entity involved a third structure, being a partnership 35% each to the parents and 15% each to the sons.

The Succession Journey

After the parents mentioned they were unsure how they were going to manage their exit from the farm and establish financial security for their retirement, they invited the family to a facilitated meeting to discuss the issues. The sons and their wives along with the daughter sat around the table with parents and a facilitator. They undertook an open and honest exchange about their aspirations and concerns for the family and the business. The issues put forward included a planned exit strategy for the parents for housing, work load and income sources, maintaining the strength of the combined family operation whilst giving the sons some independence in farm management and financial decisions, including their wives’ input into the operation, managing risk to matrimonial settlements, how to treat their daughter fairly and give both sons an opportunity to farm on their own, managing risks to the business against key personnel, increasing the rate of development on the second property to improve its independent viability. These issues were debated and required some further investigation about detail on the existing structures. Once this was done a second facilitated meeting was held, which included the family Accountant for part of the afternoon, and the family identified their preferred option to pursue.

The Agreed Succession Plan

The family agreed to meet annually to update and discuss the business situation- assets, liabilities income and profitability, plus an open forum about each family member’s 5 year plan.

After a further three years of development on the second property, the properties were sold 1 each to the sons, into their own entity, and new stock owning and trading entities were set up by partnerships of each of the sons and their respective wives. Machinery was owned by a new family entity, the father being chairman, and charged out on an hourly basis to each entity. Existing bank debt was apportioned relative to each property’s ability to generate profit. The parents were paid out enough of the land sale price to purchase a house in a local town, and have a modest sum of capital to invest and purchase small capital items they required. Their income was derived by interest on the balance of the sale price. The daughter, in addition to her education, was given a modest sum to allow her to purchase a house, and the right to call a similar amount from her brothers after giving them 3 years advance notice. The parents altered their will to forgive all the debt owed to them by their sons and all capital from their house and investments were to be left to the daughter. Enduring Powers of Attorney were made by all family members.