Wills and Estate Planning for Farmers
“What’s in the toolkit?” Getting started
In our previous article, we wrote about what can go wrong without careful planning. In this article, we discuss some strategies to avoid common problems, and how to get started.
Getting started – building your team
It is important to work with a team of professional advisers. Estate planning should involve taking advice from your lawyer and accountant, and potentially a financial planner or insurance broker as well.
Find good advisers who understand succession planning and estate planning and who also understand what you are trying to achieve.
Whether you wish to discuss the matter with your family is up to you – although in my view it should always be a matter of ‘when’ and ‘how’, not ‘if’ the family should be involved. Managing expectations is extremely important to avoid issues down the track.
Building the Will – Trusts
Crafting a solid Will involves using the right mix of strategies to achieve your aims. The correct use of trusts is one such strategy. Put simply, trusts are a way of giving assets to one person (or group of people), but directing them to manage the assets for the benefit of another person (or group of people). The Trustee (who manages the assets) is obliged to follow the rules set out in the trust, which can be either restrictive or empowering. While the rules of the trust themselves should always be tailored to suit individual circumstances, there are a few types of trusts which are commonly used.
Common trusts #1- A beneficiary-controlled testamentary trust provides control to a beneficiary, by allowing them to make tax-effective decisions with their inheritance. There are also asset protection benefits for the beneficiary (for example, in a family law dispute if they separated from their spouse).
Common trusts #2 – A protective trust can help to provide for a vulnerable beneficiary, in a situation where they might require assistance to manage their inheritance correctly.
Common trusts #3 – Creating a form of life interest might allow a person or people to use the farm to generate an income for a certain time, and then allow ownership to transfer to someone else after a triggering event occurs – such as a certain number of years passing, or the death of a certain person.
An ‘Option to Purchase’ is not a trust, but is useful because it can allow a family member to purchase the farm from your estate. Typically, it would include how the sale of property is to be structured and may include a discounted purchase price or repayments over a number of years.
Transferring the assets of any business, and particularly farming businesses, can be complex. That is why it is important to plan ahead and get the right advice.
Our next article – More from the Estate Planning Toolkit and avoiding disputes
Trent McGregor is a Wills and Estates lawyer with Robertson Hyetts in Bendigo, who specialises in farm and business succession planning. To make an appointment with Trent to discuss your estate planning needs, please call 03 5434 6666 or 5472 1588.