Planning the future for the family farm
Dying without a will may mean the end of the family farm. With no will to indicate who you would like to leave your property and possessions to, it will be divided up according to a prescribed statutory formula. To do this, your farm may need to be sold and the proceeds distributed according to the legal formula.
It used to be common for landowners to hold on to the family farm until death, leaving it to family members in a will. This meant the transfer of land did not incur stamp duty and the remaining family members enjoyed a substantial saving. However, current stamp duty exemptions mean that, in certain circumstances, the family farm can be transferred without incurring stamp duty. This has made succession-planning integral to the success of a family run farm.
Planning the transfer of property to family members is never a simple process. You should be prepared to spend both time and money ensuring it is done correctly. You need to get the right advice from your solicitor, accountant and financial planner. More importantly, you need to discuss your plans and expectations openly and honestly with all family members. Failing to consult with family members can cause unnecessary heartache long after you have passed on. Talk about your plans for the future and those of your children as well.
Often, it is natural for parents to want to treat all their children equally when it comes to succession planning. However, this approach can lead to problems. Those children who stay home and help operate the family farm may feel aggrieved if siblings who don’t contribute to the business receive an equal share of the property. This is especially true if they have not been paid a fair management wage for their work. A more appropriate structure may be that a child working on the farm receives increased equity for each year they help run the family business.
If the transfer of land is to occur before your death, then you need to consider your retirement income and security. How will you support yourself? The transfer arrangements need to provide sufficient assets and income to support you in retirement. A mortgage-back may be the answer. Again, you should seek legal and financial advice. You also need to consider what will happen if the farm is sold after the transfer. How will the proceeds be divided among the older and younger generation? If your child divorces, and no prenuptial agreement is in place to protect assets the family could lose the farm in any resulting property dispute.
Succession planning for the family farm is a complicated process. There are many variables to consider; not least the retirement plans of parents and the future career paths of children. Is the business viable and will it continue to be so in the future? The taxation and capital gains tax implications also need to be considered. As do pension entitlements, pre-nuptial contracts and the need for wills and powers of attorney. All of these issues should be discussed with your solicitor to ensure problems are avoided further down the road.
More Information
Wills and estates information brochure. Available from the LIV or ask your solicitor.
From the LIV Bookshop
Wills & Estate Planning, Renton $29.95
Family Financial Affairs, Renton, $24.95
Useful Web links
Rural law online contains information on succession planning at www.rurallaw.org.au/handbook/xml/ch09.php
The LIV website contains information on wills and estates at www.liv.asn.au/public/legalinfo/wills
Disclaimer:
The information in this newsletter is not intended to be a complete statement of the law relating to the issues raised. Accordingly, no person should rely on this information without first obtaining specific advice from Ms Eleanor Coates of Kenna Teasdale Lawyers, Melbourne. | 
