Blog
Fair vs Equal
29/05/2025
One of the thorniest issues in farm succession is navigating the “fair vs. equal” dilemma. In a perfect world, every parent would love to treat their children equally in inheritance. But as many farm families discover, equal division of assets can sometimes conflict with keeping the farm viable. How do we ensure fairness – so that all family members feel respected and provided for – without necessarily splitting the farm into pieces or undermining the successor’s ability to succeed? In this post, we’ll discuss strategies to manage family expectations and design an inheritance plan that, while it may not be exactly equal in dollar terms, is fair in the eyes of everyone involved.
The Heart of the Conflict
Family farms often represent a huge portion of a family’s wealth. If one child is set to take over that asset, the others may worry they are losing out. On the flip side, the farming child may feel that years of sweat equity and commitment merit special consideration. This can lead to scenarios like:
It’s important to recognise that fairness does not always mean giving everyone the exact same thing. Fairness in farm succession might mean each child gets what they need or value to be on an equitable footing, which could be different for each, and the contributions of those working on the farm should be considered.
Strategies for Achieving Fairness
1. Open Family Dialogue and Set Expectations Early: First and foremost, talk about this issue as a family. It can be uncomfortable, but it’s better out in the open than brewing in silence. Explain to all children what the goals are: e.g., “We want to keep the farm in the family and give Johnny a real chance to succeed, but we also want to recognize Mary and Tom in the inheritance.” Encourage each to express what they feel is fair. You might be surprised – sometimes non-farming siblings don’t actually expect an equal slice of the farm; they might primarily care that their brother or sister doesn’t get everything without any acknowledgement of them. Or they might voice that they’d be happy with certain assets (like the freehold on the parents’ retirement house, or a payout of X dollars). Getting these feelings on the table helps shape the plan. 2. Use Non-farm Assets and Insurance: One way to approach fairness is to build up or allocate assets outside the farm to other children. This might mean the parents save more in investments, or purchase something like a rental property, or even take out a life insurance policy, specifically with the intent that those will go to the non-farming kids. For example, if the farm is going to Child A, perhaps the parents ensure there’s a paid-up life insurance that pays (say) $1M each to Children B and C when the second parent passes. Child A might be the beneficiary of the farm, but B and C get a solid sum of money as compensation (the cost being borne by insurance premiums during parents’ life – effectively using some farm profits to fund that). Many families find insurance is a cost-effective equalizer: for relatively small annual premiums, you can create a large future payout to balance inheritances. Just be sure to get good advice on the correct ownership of the policy (e.g., a trust could own it, or the siblings each own a policy on parents, etc., to ensure the payout does what it’s meant to). 3. Gradual Buy-outs with Discounts: If the farm needs to be partly bought out, consider favorable terms for family. For instance, maybe the farming child agrees to pay siblings some amount over time (like a 10-year installment plan) to buy their shares, but perhaps at a discounted valuation to acknowledge that he/she contributed to growing the farm. Families sometimes agree on a value that is less than market for intra-family transfers (as a way to be fair to the one staying on farm). This requires siblings to accept they’re taking a bit less than they might get if everything were sold externally. A way to make that palatable is to say, “If we had to sell the farm to pay everyone equal cash, none of you would get to keep this heritage; by accepting a bit less, you enable your brother to keep farming and preserve the legacy, which is something our family values.” It’s a sort of family discount approach, and often families that are close-knit and communicative can get agreement on it. To further ensure fairness, you might combine this with, say, giving the off-farm siblings first right to any other assets (machinery, maybe subdividing off a small parcel like a riverfront section or the parents’ house to give to them, etc.). 4. Involving Siblings in a Limited Way: In some cases, non-farm siblings can be given a minor stake or role in the farm entity to satisfy their sense of involvement. However, be cautious: you don’t want to create a scenario where siblings who aren’t actively involved have veto power or can interfere with the farming child’s operations. 5. Divide the Farm, Not the Family – Creative Solutions: Sometimes physical division of the farm asset can be done without ruining the business. Is there a portion of land that could be partitioned off? For example, maybe there’s a woodlot or a lifestyle block on the edge that a sibling might want as their own (to live on or sell). Or perhaps if the farm has multiple parcels, one parcel could go to each child, with arrangements to allow the main farmer to lease it if the other chooses not to farm. This is tricky and depends on farm layout and viability, but it’s worth exploring if it allows each child to have a piece of the whenua (land) – which can be emotionally meaningful. Sometimes splitting land makes neither piece viable. But in other cases, a partial division might be okay (e.g., carving out a few hectares of riverfront won’t ruin a 400ha farm’s grazing ability, but gives a sibling a saleable asset or place to build a home). 6. Acknowledge Contributions Formally: If one child has invested labor or money, consider formally accounting for that in the plan. For example, if your daughter worked on the farm at low wages for 10 years, you might decide that she has essentially “earned” $X of equity – and reflect that in the will or succession agreement (like she gets an extra $X or the first $X of value from the farm). This can be documented so that when the time comes to distribute assets, everyone remembers that she already contributed that much value. Conversely, if parents have, say, paid for expensive educations or houses for the other kids but not the farming one (a common scenario: parents might help non-farm kids with house deposits while the farm kid stayed home and got less direct financial help), you can factor that in too. There’s no need to guilt-trip or keep a strict ledger among family, but noting major imbalances that have already occurred and adjusting for them in the succession plan can be perceived as fair. It’s the idea of balancing over a lifetime. Maybe Child A got a $100k university education funded and Child B got nothing comparable because they went straight into farming; then giving Child B an extra $100k of value in the succession outcome could be fair.
Managing Expectations: Communicate, Communicate, Communicate
It cannot be emphasized enough: managing expectations through clear communication is vital. A lot of hurt feelings come not from the raw facts of who got what, but from feelings of surprise or secrecy. If a child expects a certain outcome and gets another, they’re more likely to be upset than if they were prepared for it all along. For instance, if from early on everyone knows “Jack will get the farm, Jill will get the coastal property and some cash, and Alex will get cash/insurance roughly equivalent to a third of value,” then even if Jill and Alex might wish they had a farm too, they’ve had time to accept the logic. They won’t feel blindsided when the will is read. Keep in mind generational perspectives too. Parents who built the farm from scratch might think “$1m and a house is a generous gift!” while a sibling in Auckland might think “$1m barely buys a flat in my city, while my brother got a $5m farm!” Both perspectives are valid in their own context. Talking through these perspectives can lead to mutual understanding or creative solutions (maybe the sister would be happier with a smaller farm property of her own rather than cash – who knows until you discuss?). Also, emphasize the why: Explain to your children why you structured it the way you did. For example, “We decided to leave the farm to X because splitting it would likely force a sale and then none of you would have it. We know that seems unequal at face value, so here’s what we’re doing to ensure each of you is still provided for in a meaningful way… We believe this is the best way to honor our commitment to all of you while preserving something we all value – keeping the farm in family.” When children hear the reasoning (and ideally are part of shaping that reasoning), they are more likely to accept the outcome even if it’s not equal shares.
Documentation and Legal Considerations
It’s wise to formalize whatever arrangement you come to. This might be through updated wills, a family trust deed that clearly outlines how non-farming kids benefit, or a shareholders’ agreement in a farm company that specifies buy-out terms if a sibling shareholder wants out, etc. By documenting it, you reduce the chance of disputes later because the plan is clear. For example, if siblings agree to a certain valuation discount in a buyout, put that in writing in a memorandum of understanding or agreement. If parents intend a certain allocation, ensure the will reflects it accurately and maybe even include a letter to the family to be read with the will explaining the decision (though note, such a letter has no legal weight, it’s more for goodwill). Be aware of legal claims that can arise: In NZ, even if a will is clear, under the Family Protection Act, children can contest a will if they feel they haven’t been adequately provided for. Courts tend to respect farm succession plans if they’re well-documented and if the children have been reasonably provided for (like the Talbot case where the sister didn’t win her claim because the court felt she was adequately provided for with $1m and a bach given all circumstances) But avoiding court is the goal. Good communication and reasonable provision usually prevent such claims.
Conclusion
Balancing fairness with practicality is one of the toughest parts of succession planning, but also one of the most important for family harmony. Remember that your siblings and children are family for life; the farm is important, but so are those relationships. A successful succession is one where the farm passes on and the family remains on good terms. Achieving that takes transparency, creativity, and sometimes compromise from all sides. It might mean the farming child doesn’t get the farm entirely free – they may take on some debt or obligation to their siblings. It might mean the non-farming children accept that their share won’t include owning part of the homestead or land because that’s going to their sibling – but they receive value in other ways. If everyone walks away feeling the solution was reasonable, you’ve hit the right balance. If you need guidance on navigating these delicate issues, CMK Accountants and our network of advisors can help facilitate family discussions and model different fairness scenarios. We bring experience from other farm successions to suggest approaches that have worked. Ultimately, we aim to help your family reach a plan where each member feels heard and respected. Contact us for a free consultation – sometimes having an independent advisor explain the numbers and options can help align everyone on a fair path forward. Our goal is t
