Farm succession planning - the transfer of farming land
by Byll Swan Senior Consultant
"Should we transfer farming land to our sons? If so, when, and how do we protect our own financial security? And, what happens in the event of a marriage breakdown, or one of our sons meets an untimely death? What could happen to the land that has been in our family for a hundred years?"
These issues must be carefully explored and appropriately resolved before any farming land transfer proceeds. I believe that any good Farm Succession Plan involves a willingness to transfer some land into the personal ownership of the younger generation - sooner, rather than later, to ensure that the younger generation has the pride of ownership and incentive to work hard, that land ownership brings. There is nothing more likely to dull the incentive of the younger farmer and his wife, than for them to have no idea what his parents and in some instances, his grandparents, have in mind for the future ownership of the farm.
But let me warn you of what I call "The Three D's" - death, divorce or departure from the farm. I guess every Australian farmer can tell a horror story of what happened to a neighbour's farm, when the neighbour's son's marriage failed. I doubt that farmers have any greater or lesser success or failure in the marriage stakes than any other part of the community - but the forced sale of a significant farm, held in a family for a hundred years may affect many more people and have even greater emotional impact, than the forced sale of a suburban home and the division of the superannuation.
A transfer of farming land directly to the second generation can be "protected" against "The Three D's", by an expert Farm Succession Planning Lawyer, who uses his wide experience to devise strategies which will ensure that the occurrence of any of "The Three D's" will not result in the loss of the family farm.
The use of a carefully constructed Family Trust to own the majority of the family farm has, for generations, been seen by the majority of expert Farm Succession Planning Lawyers as the ideal land holding structure. For many years, New South Wales law has allowed existing family farms to be transferred, either wholly or as part of a Family Trust, free of stamp duty. These transfers are known as inter-generational transfers and under Social Security law, a gift of land to a Family Trust takes the land out of assessment for Age Pension purposes, five years from the date of the gift. BUT BE WARNED if the Minister for Family and Community services has her way, assets gifted to a Family Trust will, from 1st January, 2002 be still treated - for ever - as if still owned by the giver.