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#046 - The First 5 Financial Moves to Make When You Inherit a Farm · Dollars In The Dirt

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  Inheriting a farm doesn't guarantee financial security. Most producers
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  think that once the land is theirs, the hard part is over. After
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  helping hundreds of farmers secure over a billion dollars in finance, I
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  can tell you that managing an inherited farm requires careful planning
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  to avoid costly pitfalls. So in this video, I'm going to show you
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  the first five financial moves you need to make to protect your
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  inheritance and build a long-lasting success. Now,
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  inheriting a farm is a huge responsibility. It's not just about the
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  land or the assets you've been handed down. There's a whole financial ecosystem
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  that comes with it. And if you don't get on top of it early, you
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  could find yourself in a tough spot before you know it. Whether you're stepping
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  into the shoes of your parents, uncle or another family member, these
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  five steps will help you get the clear picture of where you stand and
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  set you up for the future. The first move you need to make is assess
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  the true debt position. It's surprising how many people inherit
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  a farm and don't fully understand the financial obligations that come
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  with it. Sometimes there's a debt tied to the property that isn't
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  obvious at a first glance. Maybe there's a mortgage, equipment loan
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  or even unpaid bill that's been carried over. You
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  need to get a clear, detailed picture of all the debts associated with the farm.
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  That means sitting down with the current financial statements, loan agreements and
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  any other documentation you can get your hands on. And if you don't do
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  this, you might be walking into a situation where you think you've been
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  sitting on a goldmine, but in reality, you're inheriting a
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  significant financial burden. For example, Let's just
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  say you inherited a beef property in Queensland turning over around $4 million annually.
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  On paper, it looks like a thriving operation. But when you dig
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  into the numbers, you find there's a mortgage tied up with a bank loan taken over
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  five years ago to buy new machinery. There might also be
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  an outstanding supplier, invoice for feed or veterinary services that
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  you haven't been settled yet. Without knowing these details, you
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  could be blindsided by repayments that eat into your cash flow. It's
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  like inheriting a car without knowing that it needs a costly engine rebuild.
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  Once you've gathered all the information, take the time to understand the terms
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  of the debt, what the interest rates are, are there any balloon
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  payments coming up and what the repayment schedule looks like. This
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  will help you figure out if the current debt structure is manageable or
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  if you need to look at refinancing or restructuring. Knowing your debt
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  position is the foundation for all other financial moves you'll
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  make. In the case of that $4 million turnover beef producer, maybe
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  the loan has a variable interest rate that recently increased due to market
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  changes, pushing repayments higher than expected. Perhaps
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  there's a balloon payment due in the next 12 months that could cause cash
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  flow issues if not planned for. Understanding these details
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  early means you can approach your bank or finance broker to
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  explore options like refinancing to a fixed rate or
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  extending the loan term to ease monthly repayments. Without
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  this knowledge, your risk of defaulting on loans or having to
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  sell assets under pressure. The second move is to separate family
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  emotion from the business structure. This is often the hardest part
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  because farms are more than just businesses, they're family legacies. But
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  when it comes to managing the finances, you've got to put the emotion aside
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  and look at the farm as a business that needs to be profitable and sustainable.
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  That means making some tough decisions about how the farm is run, who's
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  involved, and how the assets are managed. Family dynamics complicate
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  things, especially if there are multiple heirs or if there are previous generations
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  still involved in the day-to-day operation. It's important to have
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  open, honest conversations about goals, expectations, and
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  roles. Sometimes bringing in a neutral third party like a mediator
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  or a farm business consultant can help keep those conversations productive
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  and focused on the business side of things. For instance, in
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  Queensland, a beef operator turning over $3 million might have
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  siblings who inherited the shares of the property but have different ideas
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  about the future. One might want to expand the herd, another
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  might prefer to diversify into cropping and the previous generation
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  might still be reluctant to hand over full control. Without
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  clear communication, this can lead to conflict, stalled decision
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  making and missed opportunities. You also need to think about
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  the legal structure of the family business. Is it set up as a sole trader, partnership,
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  company or a trust? Each structure has a different implication for
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  tax, liability and succession planning. And if
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  the structure isn't right for your current situation, it might be time to
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  make changes. And this can be a complex area, so getting the
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  advice from professionals who understand both agricultural and
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  business law is crucial. For example, many family farms
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  start as sole traders or partnerships, but as the business grows
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  and more family members become involved, a trust or company structure
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  might offer better asset protection and tax advantages. In
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  Queensland, where land values and turnover can be substantial. Structuring
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  the business correctly can also help with succession planning, ensuring
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  the farm stays in the family and the transition is smooth. Now, before
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  we move on to the next point, if you're looking at purchasing a property or
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  growing your business, or you want someone genuinely in your corner, book
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  a free call. I'm here to help to get the right loan structure that fits
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  your unique situation. The link is in the description below. The
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  third financial move is to review existing banking relationships. When
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  you inherit a farm, chances are there are existing loans and
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  banking arrangements in place. It's important to review these
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  carefully. Sometimes the bank that's been involved for
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  years might not be offering the best terms anymore. or
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  their lending policies might have changed. Other times you might find
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  that you've locked into a loan that doesn't suit your cash flow or growth
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  plans. Take the time to meet your bank manager or finance broker to
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  discuss your current finance situation, future plans, be
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  upfront about your goals and ask for a review of your loan terms. There
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  might be opportunities to refinance at better rates, consolidate debt
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  or access additional finance to invest in improvements or expansion. For
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  a beef producer in Queensland with a $3 million turnover, this
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  could mean negotiating for a loan that better matches your seasonal cash
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  flow. Beef farming is highly seasonal, with income spikes at
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  sales and expenses spread out throughout the year. If your current
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  loan requires fixed monthly repayments that doesn't align with this cycle, it
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  can create unnecessary pressure. A flexible loan structure that
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  allows interest only periods or read-off facilities during low
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  cash flow months can be a big difference. Don't be
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  afraid to shop around. Different lenders have different appetites for agricultural
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  lending and you might find a better fit elsewhere. Also
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  consider the value of having a banking relationship that understands the
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  agricultural sector and is willing to work with you through the ups and
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  downs of farming. For example, some lenders specialise in rural finance
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  and may offer tailored products for beef producers including seasonal overdrafts
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  or equipment finance with deferred repayments. Having a lender
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  who understands the risk of drought, fluctuating cattle prices and
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  long-term nature of farming investments can be invaluable. The
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  fourth move is to build a working capital buffer. Farming
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  is a business with a lot of variables, weather, market prices, input
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  costs, all of which can impact your cash flow. And having
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  working capital buffer means you have funds set aside to cover the
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  day-to-day expenses and unexpected costs without having to scramble
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  for emergency finance. Start by
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  analysing your current cash flow. Look at your income and expenses over
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  the past 12 months to identify patterns and seasonal fluctuations. From
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  there, determine how much working capital you need to comfortably cover
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  your working costs for the next 3-6 months. This buffer will
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  give you the peace of mind and flexibility to manage the farm through tough
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  times. In a $4 million turnover beef operation in
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  Queensland, this could mean setting aside enough cash to cover feed purchases
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  during a drought, repairs to essential equipment, or vet bills
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  if there's a disease outbreak. If your monthly operating costs average
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  $100,000 a month, having a buffer of $500,000 to $750,000 might sound high, But
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  what it'll do is keep your business running smoothly when income is delayed or
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  unexpected expenses arrive. If you don't have this buffer in
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  place, consider ways to build it. This might mean setting
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  aside a portion of your income each month, reducing discretionary
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  spending, and accessing finance with flexible repayment
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  options. Remember, the goal is to avoid being caught short when
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  unexpected expenses come up. Finally, the fifth move is
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  to establish an advisory team No one can do it
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  all alone, especially when it comes to managing a farm's finance. Having
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  a trusted team of advisors can make a huge difference in your ability to
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  make informed decisions and plan for the future. Your advisory
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  team should include a good accountant who understands your agricultural business, a
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  finance broker who can help you navigate the lending options, and a
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  farm business consultant who can assist with the operational efficiencies and
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  possibly a legal advisor for succession and estate planning.
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  If you're dealing with family dynamics, a mediator or counsellor might also
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  be valuable. For a beef producer in Queensland, this team might also
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  include a livestock agent who can provide market insights, a
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  nutritionist to optimise herd health and feed efficiency, and
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  even technology consultant to help implement farm management software to
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  track costs and productivity. Building this team takes time, but it's worth
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  investing in. These professionals provide objective advice,
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  help you identify opportunities and risks, and support you through challenges. They
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  become your standing board and help you stay focused on your long-term goals.
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  To wrap up, inheriting a farm is a big step, but it doesn't have
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  to be overwhelming if you're taking the right financial moves early on.
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  assess your true debt position, separate your family emotion from
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  business decision, review your banking relationships, build a
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  working capital buffer and establish a solid advisory team.
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  These five steps will help you protect your inheritance and set your
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  farm up for lasting success. If you're in the process of inheriting
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  a farm or have recently done so and want to make sure you're on the right track,
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  I'm here. Book a free call with me and we'll talk about your
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  situation and how to structure your finance to support your goals. The
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  links are in the description below. Thanks for listening, and