Intergenerational Transfers – Farm Succession
Farmers who own and manage properties that have been farmed by their family for, sometimes, generations – should have a succession plan for the transfer of the family property to the next generation so the family can continue to farm the family asset. The transition to the next generation can leave unhappy or disappointed family members and if you leave the succession arrangements to your Will this disappointment or jealousy may result in proceedings under the Family Provision Act or even in some cases, a challenge to the transfer on other legal grounds.
It is best if the intergenerational transfer is done with a family succession plan, contained in an agreement between all family members. The agreement providing how the assets are to be distributed between the children or successive generations. This is only an option if everyone is treated fairly and everyone agrees, however, it is normally best discussed and all family members are taken into account.
The other important issue with a succession plan, where assets are to be transferred, is to ensure the person making the transfer retains or has control of, or access to, sufficient assets or income to finance their retirement, care and residential accommodation or as a security deposit.
Intergenerational transfers under the Family Farm Transactions provisions of the Duties Act, provided the transfer meets the criteria of the Duties Act, can be free of duty. For intergenerational transfers of assets it is essential there be a balancing between the duty free farming asset and other family assets so those not receiving the farming asset receive other assets or benefits.
It is important to agree on a succession arrangement between family members and to discuss with them the terms so a plan can be agreed. The preferred choice may be to establish a trust in the Will, as such, a trust may be able to reduce the impact on assets of a divorce, death or mismanagement.
Before decisions are made on a succession plan or family discussions are held on such a plan, it is important to have appropriate accounting and legal advice on potential ownership structure and succession plan for your family.
It is not possible to contract out of the Family Law Act or the Family Provision Act however you can put in place agreements and/or trusts that can reduce the impact on your estate arising out of these Acts.
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