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Keep the farm in the family.
Over the next 20 years, an estimated $150 billion in New Zealand farming assets will change hands. Most farming families don't have a plan. Starting the conversation early creates more options for everyone.
Start 5-10 years before retirement.
Succession planning works best when it starts early. Experts suggest beginning conversations when children are in their teenage years, not when parents are approaching retirement.
"The most common mistake is delaying the conversation. Meanwhile, the farming child invests years of their life without certainty."
Build equity over time
Early planning allows time for the farming child to build equity in the operation. This can happen through sweat equity arrangements, lease-to-own structures, or gradual share purchases over many years. A child who has been building ownership for 15 years is in a very different position than one trying to buy in at retirement.
Give non-farming children time
If non-farming children understand from a young age that the farm will pass to a sibling, they can focus on education, careers, and building their own assets. Surprises at the reading of a will create conflict. Transparency over time creates acceptance.
Keep your options open
Early planning gives parents options. They can test whether a child is truly committed to farming. They can adjust plans as circumstances change. And they can make decisions while healthy and thinking clearly, not under pressure of illness or urgency.
Fair versus equal.
How do you treat all children fairly when one will receive the farm and others will not? Equal division rarely works when most of the family wealth is tied up in land.
Recognise different contributions
The farming child often works for lower-than-market wages for many years. Their sibling may have received help with education or home deposits. Fairness means accounting for these different family investments over time.
Consider viability
If the farm is burdened with too much debt to "pay out" siblings, the farm itself may fail. Both parents and non-farming children must consider whether it's better for the farm to stay in the family or be sold to achieve equality.
Focus on the family legacy
Many families decide that keeping the farm in the family for future generations is the priority. Non-farming siblings often support this, even if it means they receive a smaller financial share of the inheritance.
Structures that help.
Several legal and business structures can support farm succession. The right choice depends on your family's circumstances.
Company structures
Increasingly preferred over traditional family trusts. A company can issue shares gradually as the next generation buys in. It provides clear governance through a board.
28% company tax rate vs 39% trust rate
Lease-to-own
Let the next generation farm the land while building equity over time. The farming child pays rent, which provides parents with retirement income. A portion of each payment may count toward eventual purchase.
Life interest
Allow parents to remain on the farm or receive income from it during their lifetimes, while ownership transfers to the next generation. Provides security for parents without delaying the transition.
Learn more about life interests ->Contracting out
Agreements between the farming child and their partner can protect the farm from relationship property claims under the Property (Relationships) Act 1976. If the farming child's relationship ends, the farm stays in the family.
Read about contracting out ->Insurance
Can play a role in equalising outcomes. Some families use life insurance to provide a legacy for non-farming children, funded by the farming operation. This reduces pressure on the farming child to "pay out" siblings.
A note on trusts
Many advisers now view trusts as obstacles to succession rather than enablers. With the 39% trust tax rate (from April 2024) and Trusts Act 2019 compliance requirements, company structures are often preferred.
Read: Do I still need a trust? ->Common mistakes.
Some patterns consistently lead to poor outcomes in farm succession.
Waiting too long
Most Common
Parents want to avoid conflict or don't want to think about their own mortality. Meanwhile, the farming child invests years of their life without certainty, and other children develop expectations that may not match reality.
Not involving everyone
Communication
When parents make succession decisions without input from children, resentment builds. Even if children don't get veto power, being heard matters.
Ignoring the in-laws
Family
Spouses and partners of all children have views and interests. Their support (or opposition) affects whether plans succeed. Including them in conversations, or at least considering their perspective, helps.
Assuming they want to farm
Reality
Not every farmer's child wants to be a farmer. Pressuring someone into farming because "it's what the family does" often ends badly. Genuine conversations about interests and capabilities matter.
Confusing succession with estate planning
Critical Distinction
Succession is about transferring the business during your lifetime. Estate planning is about what happens when you die. They overlap, but they're not the same. A good succession plan should work whether parents live to 95 or die next year.
Read about business succession planning ->How to begin.
If you haven't started succession planning, the first step is simply to start talking. Not about legal structures or tax implications, but about what each family member wants.
Questions to start with:
- What do parents need for retirement security?
- What does the farming child envision for the operation?
- What do other children expect, and what would they consider fair?
- What matters most to everyone?
These conversations can be difficult. Some families benefit from a facilitator, whether that's a trusted accountant, a succession planning specialist, or a family mediator. Having someone outside the family guide the conversation can make it easier to discuss hard topics.
Professional advice comes last
Once you have a sense of what the family wants, professional advice helps translate that into workable structures. Lawyers, accountants, and farm consultants all play roles. The legal documents come last, after the family has worked through the bigger questions.
Succession in Hawke's Bay.
Our region presents particular challenges and opportunities.
Orchards and vineyards
Hawke's Bay orchard and vineyard families often have land that has appreciated significantly in value. The gap between market value and what the next generation can afford is especially wide. Creative structures and long timeframes are often necessary.
Māori freehold land
Many Hawke's Bay farming families also hold interests in Māori freehold land. This land operates under different rules and requires Māori Land Court involvement. General estate planning and Māori land succession need to be coordinated carefully.
Post-Cyclone Gabrielle
Since Cyclone Gabrielle, some families are also processing insurance settlements, land category decisions, and changed circumstances that affect succession plans. What made sense before the cyclone may need revisiting.
Overseas Investment Act
If any of your children have moved overseas and become non-residents, the Overseas Investment Act may affect whether and how they can inherit farmland. This needs to be factored into your succession planning.
Key Takeaways
Start succession conversations 5-10 years before retirement, not when parents are ready to retire
Fair and equal are not the same thing - recognise different contributions and timing
Company structures are often preferred over trusts, especially with the 39% trust tax rate
Contracting out agreements can protect the farm from relationship property claims
Involve all family members in the conversation - surprises in wills create conflict
Succession (transferring during life) and estate planning (what happens on death) are different but related
Farm Succession Guide
Step-by-step guide to planning your farm's future
Related Guide
Plan a succession that balances fairness with farm viability.
Read the Farm Succession GuideRelated Reading
What comprehensive estate planning includes
Estate planning is more than making a will. Comprehensive planning brings together wills, trusts, and EPAs into a coordinated plan that protects you and your family.
Understanding Family Protection Act Claims
Family members who feel inadequately provided for in a will may have grounds to challenge it. Understanding this area of law helps both potential claimants and executors.