Publications - Estate planning

“Frankly My Dears, I Won’t Gift the Dam”

There are many issues to consider in succession planning for farmers and graziers, when one generation leaves the farm either by choice (for example, retirement or intergenerational farm transfers) or circumstance (unexpected death, total and permanent disablement, or insolvency, for instance). In this article we take a look at a common scenario: husband and wife farmers with multiple children, and the major asset being the cash-strapped farm.

This was the case when we were recently approached by a farming family to review their wills, made almost twenty years ago when the three children were in school. The situation, as it was explained to us, was that the father primarily worked the farm with assistance from the eldest son, who had a young family of his own and the farm could not afford to pay him for full-time work. The mother worked ‘in town’ to help meet costs, and the other adult children had left the farm with the assumption that the eldest son would inherit and work the farm.

In preparing the parents’ wills, it was not a straight forward process of leaving everything to each other, and then gifting the estate to the eldest son upon the death of the survivor of them. It would not have been appropriate to leave the farm outright to the son if one of the parents were still alive, nor would it have been fair to the eldest son to split everything equally between the children – aside from ignoring his greater contributions to the farm, the eldest son would have owned and worked the farm alongside his siblings who would not have been able to assist him. Yet, the children who had sought careers off the farm could not be forgotten.

The parents needed to provide for each other, but also consider the viability of the farm and balance out the interests of their children. There was no tension between the children, but even so there was a high possibility of a family provision application being brought by not just one, but several beneficiaries.

By thoroughly reviewing the parents’ assets, liabilities, business structures and investment strategies, and considering the comparative needs of the children, we were able to assist the parents in preparing wills that incorporated various structures to keep the farm in the family and make provision for each other and the children from non-farm assets, to avoid impractical and unfavourable ownership of assets and to make any challenge of the parents’ wills less likely.

An article by our director Paul Kelly, also in this edition of the Kellygraph, highlights the disadvantages of preparing simple or equal-share wills with farming families – there are added complexities which should not be ignored and left for beneficiaries to argue over in the future, potentially at the cost of the estate and to the detriment of each other.

Kirsten Beck is a Solicitor and part of the Business & Estates Team at Kelly Legal and can be contacted on kirsten.beck@kellylegal.com.au

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