Summary
Succession in all the farm case studies involved passing on large capital assets valued at between $638,000 and $2.74 million.
The farmers, with one exception, prefer the simple ownership structures of sole trader or partnership and are no longer so concerned with creating more complex structures to avoid income tax and death duties.
The farmers' retirement plans vary widely, are flexible and depend largely on the intentions of the succeeding son. They ranged from retirement in the fifties to not retiring at all.
All the case study farms, with one part exception, were to be passed on to sons not daughters.
The farmers' attitude to succession was not that the family farm should be preserved at all costs, but that the estate should be conserved, the farm business
should be viable and that it should be passed on with minimal disruption to the family.
The process of farm transfer involves gradual passing on of labour, management decisions, financial control, occupation and ownership of the farm. The crucial time for the viability of the business and the living standard of the parents is when they must remove capital to set up a home for their retirement.
All cases were examples of balancing the priorities of
- the farm viability,
- support for the parents in retirement and
- fairness to other family members.
It appears that viability wins, at the expense of other children who may inherit only the remains of the parents' estate on their deaths.
The parents' assets on retirement vary enormously, from $44,000 to $1,547,000, depending on the degree to which they have passed ownership to the next generation. The size of the parents' assets bears little relation to their retirement income.
The parents' estimated retirement income after tax ranges from $14,000 to $54,000. Both the farms where succession has been completed were among the three cases which fell below the chosen bench mark of $22,800. Farmers may underestimate their need for income in retirement and come to depend on the goodwill of the child who has taken over their assets.
The farms after succession showed status quo surpluses of between $16,000 and $48,000 available for personal drawings and profit. Four of the ten farms have marginal viability after succession, with surpluses below $25,000. Of these two can be salvaged by fine tuning succession plans, but two may not be viable because of their small scale and modest production levels.
None of the successors could hope to take on the farm on market terms but required assistance in the form of gifts, low or nil interest loans and eventually bequests.
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