Friday, March 29, 2024

Planning highs and lows

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Two recent examples I have worked with highlight good and bad aspects of planning for farm succession.
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In the first, just about everything went wrong in a family of two sons and three daughters, with one son wanting to buy the farm but never saying anything. Another son ended up breaking away from the family because of the debilitating effects of the personal and financial pressure. To complicate matters the in-laws became involved.

It became a complete mess with the parents and owners of the farm having to referee while trying desperately to accommodate the needs and wishes of each of their five children.

When the sale did eventually go through it was completed on a basis that was not the most tax efficient, nor did it offer the best retirement terms for the parents. Relationships were irreparably damaged.

By contrast Trevor and Harriet Hamilton, who built a $100 million dairying business from scratch, got it right when they decided to address their issues around succession planning.

The Hamiltons, from Rotorua, knew with a business that size, they needed real expertise to help guide and manage the future of their business so that it would continue to grow and prosper beyond their lifetimes. They wanted it set up so the family members who wanted to be involved could find a role that fitted their skills, while other family members could derive dividends from the business to benefit education and other family orientated goals.

Trevor and Harriet are the type of people who never stop learning; they brought in independent advice, outlined their goals, tweaked the resulting plan where necessary and set up an independent board with a clear mandate to continue to maintain and grow the business. This board has provided a non-emotional commercial forum for family members to discuss and agree strategies and decisions that affect them all.

Four of five family members remain involved in the current eight-farm operation. There is the ability to carve new farms out of the existing should a family member choose to buy and farm for themselves, and the non-involved family may receive dividends that continue to benefit the whole family.

It’s a great example of turning a family business into an intergenerational, corporate business through applying good disciplines around succession planning.

Marise James is a partner at Staples Rodway Taranaki. The firm provides specialist succession planning advice. This is the second of a three-part series dealing with succession for dairy farming families.

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