Helping With Farm Succession Planning
The Challenge of Family Farm Succession Planning
Farm succession is a challenging area. At its core is an asset, being the land, that is generally high in value but produces returns of between 1% to 4%.
And in an ideal world, when it comes time to transition that asset from one generation to the next, those wishing to purchase the farm would pay out family members equally.
However, due to the low returns, it means that when you try to borrow the funds needed to buyout other family members, that the farm does not generate enough cash to cover interest and principle payments.
So, for the incoming next generation farmer to have the ability to complete the farm purchase, they need an uneven amount of financial assistance. And it’s the requirement for this uneven playing field is where challenges often occur.
Improving Farm Succession
We believe that the outcomes of Farm Succession can be made much easier through establishment of an investment portfolio. This portfolio while initially small grows at a rate higher than the rise in the value of the farm. And because of this growth is available as a lump sum of capital to be used when the farm succession transaction is ready to occur.
For instance, consider borrowing an amount of $500,000 from your Bank at age 50. If this was invested for 15 years at an investment return of 11% after all fees and taxes* then at age 65, this amount would be worth $2.392m.
*There are no taxes payable on capital gains for shares in NZ and Australia. Foreign Investment Fund(FIF) tax is payable on financial market investments outside of New Zealand.
How We Work
Family Farm Succession is important to all members of the family.
And we also recognise that all financial situations are unique and any solutions must reflect that.
Because of this importance & uniqueness we follow a structured approach to ensure that we have the best possible chance of achieving the best outcomes.
| Introductions | We are generally introduced through your solicitor, accountant or a professional in the field of family farm succession planning. |
| Understanding You | Our first meeting is based on understanding you, your family and your financial position. Then, we want to talk about what you are thinking in terms of farm succession. |
| Developing Solutions | Then its time for use to go to work. Calculating the likely future value of assets, liabilities and farm equity. Then, putting down on paper what solutions Earnslaw Goodlight can provide that will make farm succession easier. |
| Discussion& review with the team. | Then we present our recommendations for discussion with all parties including trusted advisers as needed. |
| Make Amendments | Then we are making corrections and amendments to a final plan. |
| Implementation | When signoff is in place, then we put the plan in place, supported by an Annual Review. |
Outcomes
With Earnslaw Goodlights help we can make the farm succession journey easier.
| Preserve Family Legacy | Reduced Family Conflicts | Improved Financial Stability | Smoother Ownership Transition |
|---|---|---|---|
| By developing a Farm Business Succession Plan early, families have time to put in place and implement the strategies that lead to better outcomes. | When Fam Succession is done well the likelihood of family disputes is reduced. | A well executed farm succession plan helps protects the farms financial health. It means vulnerability to lenders is reduced and opportunity to grow is enhanced. | With the farm succession plan made easier, it allows for the process to unfold smoothly without holdups. |
Get Started with Earnslaw Goodlight
Secure the future of your family farm today. Contact Earnslaw Goodlight to talk about us assisting you with your farm succession plan to ensure it remains remains a thriving family asset for generations. Call us at 0800 827 827 or email info@earnslawgoodlight.co.nz to take the first step.
