Estate Planning for farms – avoiding disputes
In my final article I will be looking at four common causes of disputes and suggesting some solutions.
Cause of disputes #1 – Undocumented and unfulfilled promises “All this will be yours if you stay” or “I’ll look after you later, but we can’t pay you now”. To a young farmer, such promises are crucial to their future financial wellbeing so that they can provide for their family. Such comments should not be taken lightly. Disappointed beneficiaries can sue by asserting estoppel, or a constructive trust, to enforce a verbal or even an implied promise.
The solution is that specific, honest, and regular conversations with family members should then result in immediate implementation. Your team of advisers should be notified if you have made promises to a family member, or if an allegation of such a promise could be made against your estate.
Cause of disputes #2 – Insufficient detail in estate planning A simple Will dividing an estate evenly between children, where one wants to own the farm while the others want cash immediately, is a recipe for disaster. The farm might need to be sold, or divided – rarely appropriate outcomes.
The solution is to work with a team of advisers to make sure your estate plan is appropriately sophisticated, and recognising that ‘equal’ is not necessarily the same as ‘fair’.
Cause of Dispute #3 – Mismatch between expectation and outcome Problems arise where a potential beneficiary expects, but does not receive, an inheritance.
The best way to manage expectations depends on the situation and the personalities involved.
One solution is to hold discussions, either individually, or as a family unit. Consider having a trusted adviser to act as a moderator to help keep the conversation structured, civil and productive.
Alternatively, assets can be gifted during life to intended beneficiaries, either directly or via a trust, to reduce the risk of estate litigation. With care, stamp duty and capital gains tax consequences of such gifts can be minimised. Transferring assets to a trust is a useful way of allowing the older generation to retain control, and to hand over the reins to the right people at the right time.
Cause of disputes #4 – out of date estate plans Older documents might undervalue a family member’s work or contributions to the farm’s success, fail to account for gifts made to beneficiaries during life, or appoint executors who are no longer capable of acting.
An estate plan should be reviewed annually, although documents may not need to be altered quite so regularly.
The final word
The best way to avoid disputes is to have an Estate Plan as part of a broader farm Succession Plan. Take advice from your team of advisers – whether and how you include your family will depend on your circumstances.
Estate Planning is such an important step in planning for the future, avoiding disputes and ensuring you protect both your assets and your family. I would encourage you to start the conversation today with your advisers and your family.
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 03 5472 1588.