That step is involving an independent advisor or advisors. It could be your lawyer, accountant or some other expert that can provide the necessary level of independent advice that takes the sting and the emotion out of some of the hard questions and makes it easier to address the issues around fairness.
Then you’ve got two questions to consider:
* Are you looking at succession from an ongoing management point of view or
* Are you looking at succession from an inheritance point of view?
They are quite different proposals. When you look at the first question, you have to ask if you want the family farming business to be run under management for the ongoing benefit of the family and whether there is a member of the family who is capable and or interested in that option.
If the answer is no, or you decide you want to cash up, the discussion becomes fairly straightforward around how you divide the inheritance from selling the farming operation.
Having that independent advice means all parties affected by the discussion can articulate their views and the decision can be made on a purely commercial basis, removing the emotion from those tougher decisions.
However, if the answer is yes and the decision is to continue the business and involve the family, things become more complex.
First, there should be no expectation that the farm/s will pass to a family member as of right. They must have the skills and capability to manage the operation, not just have it passed to them, or worse, dumped on them. This is especially important if the farming business is to continue to provide dividends for other members of the family.
If the view is the interested family member/s will develop the necessary skills, the appropriate structures and resources need to be put around them to ensure they continue to learn and pick up those skills before taking over the operation. Those structures will also be important to the continued success of the business and to ensuring the sustainability of dividends over an extended period of time.
They also eliminate the possibility of future resentment developing among family members and, when it’s time to leave, provide the current managers/owners with a clear exit path and access to the cash they need for their retirement.
Marise James is a partner at Staples Rodway Taranaki. This is the last in a three-part
