We know you put a lot of hard work into running and maintaining your farm – and we know that farms are often made up of a combination of valuable assets including land, equipment, commercial relationships and highly specialised knowledge, accumulated carefully and strategically over many years and across several generations.
Over the next three weeks, we will be writing one article each week, focused on Wills and estate planning for farmers – which is an important part of succession planning. Succession planning ensures that asset allocation is planned and organised during life or after death.
Farm businesses are unique and require careful estate planning to reduce the risk of substantial tax payments or litigation when it is time to sell, retire or pass to the next generation.
Often structured through partnership, trusts, and superannuation funds, estate planning looks strategically at the many ways of passing farm assets to the next owner in an orderly and tax effective manner.
There are three key reasons why farm businesses should consider estate planning:
1.Asset protection: Farm assets cannot usually be easily divided. Relying on a simple Will (or the laws of intestacy) to divide assets between family members might force a fire sale of the farm, break up the farm into smaller parcels which are less valuable, or require a family member to buy out others at a time when they cannot afford to do so.
2.Ownership structures: Farms are often owned by way of trusts (such as unit trusts, family trusts, or self-managed super funds). Assets owned by trusts are not covered by a basic Will.
3.Disputed estates: Estate planning often includes communication between family members to reach an understanding on the transfer of assets. Without proper communication amongst family members, a mismatch can arise between expectation and reality–for example, where a family member might be expecting to inherit the farm after working on the farm for free or for below market salary. ‘Equal’ is not the same as ‘fair’. Anticipating problems early is always the best approach.
What is involved in an estate plan? An estate plan sets out how ownership and control of assets is transferred to your beneficiaries during life or after death. Each plan is different depending on individual circumstances, and can be as simple or as complex as you like.
Typically, an estate plan would consist of a Will, Powers of Attorney, and Death Benefit Nominations (for superannuation benefits), and might also include Deeds of Succession of Trustee or Appointor, amendments to existing Trust Deeds or Partnership documents, and a Memorandum of Wishes (which brings the various parts of the estate plan together).
Where do you start? There’s really four things you need to think about – what do you own, what do you control, who do you want to leave your assets to, and how should they receive it?
To get started, reach out to Trent McGregor, Wills and Estates Lawyer with Robertson Hyetts in Bendigo and Castlemaine, with experience in farm and business estate planning and succession planning. Contact Trent on 5454 6666 in Bendigo or 5472 1588 in Castlemaine.
Next week – More from Trent’s Estate Planning Toolkit and avoiding estate disputes