The elephant in the room: Succession


If anything is going to rupture a rural family, it’s farm succession, or handing down to the next generation.

So often it’s the elephant in the room, the issue no-one wants to talk about.

There are some horror stories about succession-gone-wrong.

Take this example: Son leaves school early and works long hours on the family farm for low wages.

His expectation? That the farm will eventually be his.

In 1992 he buys, with his wife, the neighbouring farm for $500,000 but the purchase is wholly financed by the parents through a mortgage on their own farm.

However, the new farm is in the son’s name.

The son works hard for no more than labourer’s wages while the capital gains on the property go to the parents.

He is unable to build up savings or capital with all of the farm’s revenue going to the parents.

A few years later, father and son fall out. The son wants to go it alone, but the father won’t have a bar of it. So, the son quits. Soon after, his marriage falls to pieces.

By the time the case is heard in court eight years later the not-so-new-anymore farm is valued at $1.8 million.

The family agrees that the parents are entitled to a share which the court will determine. The son and estranged daughter-in-law then must agree on how to divide the remaining share between them.

The judge decides on a 38 per cent share for the parents, which they appeal. Two years later the Court of Appeal awards them an increased share of 42 per cent.

But it’s not all bad news.

There are some fantastic examples of succession plans where both the farmer and all the kids are catered for.

Take the Williams family in Wairarapa.

Three siblings live on the property. One runs the main farm. Another has the homestead and runs a catering and functions business, and the third has a helicopter operation.

Or the Wallis family at Minaret Station, Wanaka. They have a dozen helicopters in the air every day. The station has enabled the family to develop the heli-business, build their luxury tourist lodge and acquire a game-packers.

A whole range of other business interests has grown from farming due to careful succession planning.

– By Pat Deavoll