Linkedin
Facebook
Email
more
When your agribusiness is most of the estate, how do you provide for non-farming children?
An estate equalisation strategy can help you create a fair inheritance for all heirs without compromising the farm's viability.
There are several options to consider, each with its own financial and tax implications, so it’s important to speak to an experienced financial planner.
Life insurance 
Life insurance policies are a powerful tool for estate equalisation in farm succession planning. You can establish a policy on the lives of the parents and name non-farming children as beneficiaries. Upon the parents' passing, the insurance payout provides these children with a liquid cash inheritance.
It provides financial stability for all parties and avoids the need to sell off parts of the farm to pay out non-farming family members. Properly structured, this approach can be a clean and effective part of the planning process. However, there are many factors to be aware of with this strategy, so again you should consult with a financial planner.
Partial title transfers
This involves giving non-inheriting children ownership of specific, non-essential farm assets. For example, they might receive title to a separate parcel of land that can be sold or leased out without disrupting the core farming operation.
This approach requires careful consideration of legal and tax issues. Work with a lawyer to ensure the transfer of ownership is structured correctly and to understand any potential stamp duty or capital gains tax implications. Clear agreements are needed to prevent future disputes over the use of the asset.
Retirement strategies for farmers without superannuation 
Another common issue in farm succession is that the older generation has limited retirement funds. Many farmers reinvest all their profits back into the business, forsaking superannuation contributions. This means they may need to rely on income from the farm to fund their retirement after the succession plan is in place.
Fortunately, there are retirement strategies that can ensure financial stability for everyone involved.
Contract farming and intergenerational wealth
In this model, the retiring parents can lease the land or assets back to the farming heir, who pays them a regular fee. This creates a predictable income stream for retirement, while allowing the next generation to manage the farm.
This approach allows for a seamless transition of intergenerational wealth, where the farm’s productivity directly supports the family's financial security across generations.
Leveraged retirement strategy
In some cases, a farm may be significantly debt free or have a low debt to equity position. In this situation, drawing equity from the farm (in the form of a formalised bank loan against the farm) can provide valuable capital to establish or boost tax-free superannuation benefits.
When sufficient capital is finally achieved within the superannuation environment to draw a regular, tax-free retirement income, the parents may transfer the farm to the next generation (including debt).
Navigating farm succession planning with an uneven asset distribution requires thoughtful strategies and open communication among family members.
To discuss your retirement and farm succession contact an RSM financial planner who will assist you in developing a tailored plan.
