Last week, we wrote about what can go wrong without careful estate planning. This week, we go into details on trusts and transfer of assets, and how to get started.
Building your team
It is important to work with a team of professional advisers. Estate planning should involve taking advice from a lawyer and accountant, and potentially an insurance broker as well.
Find good advisers who understand and have expertise in farm succession planning and estate planning and who also understand what you are trying to achieve.
Whether you wish to discuss the matter with your family is up to you – although in our view, it should usually be a matter of ‘when’ and ‘how’, not ‘if’ the family should be involved. Managing expectations is extremely important to avoid conflict, or even costly disputes, down the track.
Building the Will – Family trusts
Crafting a solid Will involves using a mix of legal documentation and we’re here to help. Family trusts are a way of giving assets to one person (or group of people), and directing them to manage those assets for the benefit of another person (or group of people). The Trustee (who manages the assets) is obliged to follow the rules set out in the trust, which can be either restrictive or empowering. While the rules of the trust should always be tailored to suit individual circumstances, there are a few types of trusts which are commonly used.
#1: A beneficiary-controlled testamentary trust provides control to a beneficiary by allowing them to make tax-effective decisions with their inheritance. There are also asset protection benefits for the beneficiary (for example, in a family law dispute if they separated from their spouse).
#2: A protective trust can help to provide for a vulnerable beneficiary, in a situation where they might require assistance to manage their inheritance correctly.
#3: Creating a form of life interest might allow a person, or people, to use the farm to generate an income for a certain time, and then allow ownership to transfer to someone else after a triggering event occurs – such as a certain number of years passing, or the death of a certain person.
An ‘Option to Purchase’ is not a trust, but can be useful because it allows a family member to purchase the farm from your estate. Typically, it would include how the sale of property is to be structured and may include a discounted purchase price or repayments over a number of years.
Transferring the assets of any business, and particularly farming businesses, can be complex. That’s why it’s important to plan ahead and get the right advice.
To get started, reach out to Trent McGregor, Wills and Estates Lawyer with Robertson Hyetts in Bendigo and Castlemaine, with experience in farm and businesses succession planning. Contact Trent on 03 5454 6666.
Next week – More from Trent’s Estate Planning Toolkit and avoiding estate disputes
