The wealth of a farming family can take many life-times to accrue, but disappear in an instant through poor succession planning. This is particularly an issue for families looking to pass on wealth to the next generation where on-farm and off-farm children are involved.
Andrew Sinclair and Phil White, Cowell Clarke Commercial Lawyers
The wealth of a farming family can take many life-times to accrue, but disappear in an instant through poor succession planning. This is particularly an issue for families looking to pass on wealth to the next generation where on-farm and off-farm children are involved. Typically, the parents want to ensure that the family farm, which generally has been in the family for generations, stays in friendly hands so that the farming legacy of the family continues.
More information is available at http://www.cowellclarke.com.au.
As the bulk of the family’s wealth is generally tied to the farm, the consequence is that the on-farm children receive the bulk of the parents assets whilst the off-farm children receive whatever other assets remain. This uneven distribution of the family assets opens the door for the off-farm children to make a claim on the estate of their parents for inadequate provision.
The repercussions of this are twofold: family disputes of this nature incur substantial legal costs which erodes the family wealth, and the relationships between the surviving family members rapidly deteriorate.
Engaging succession planning lawyers near to retirement (or earlier) to develop a comprehensive succession plan helps avoid this scenario, keeping the family farm and relationships intact. Having a clear succession plan that all parties understand and agree upon is one way to manage the expectations of the children, keep relationships amicable and mitigate the risk of expensive legal disputes down the track. Leaving these decisions up to the Court is a certain way to deliver turmoil to the next generation.
Any succession plan should also take into account numerous taxation issues that are triggered upon the change in control of substantial assets - namely capital gains tax and stamp duty. In many cases, the tax exemptions and concessions are there to be utilised by the parties, it’s just a matter of the family seeking the right advice from the right advisors.
Being involved with the preparation of a succession plan can also be a great opportunity for the next generation of farmers, about to inherit significant assets, to consider their own commercial objectives such as asset protection, the tax effectiveness for their own farming business and the structuring of their affairs.
Significant time needs to be invested - to contemplate alternatives in order to arrive at an appropriately considered farm, family succession strategy.
More information is available at http://www.cowellclarke.com.au.
