One way to really focus on farm succession is to ask: What would happen if both Dad and Mum died tomorrow?
Far too often I meet people in all types of businesses who have not made a will or their existing will does not correlate with their present wishes. Sometimes a will even contradicts what was intended or does not provide anywhere near the best outcome for both non-farming children and a farming child.
Some people think they are immortal and delay making a will. Others decide because of their personal circumstances, that it's just too difficult to tackle the issues. They may even assume that their surviving partner will automatically inherit their estate.
In Victoria, when a person dies without a will and leaves one partner and children of that relationship, then the partner will benefit from the whole of the estate. On the other hand, where there is one partner and children born of a different relationship, then the partner will receive all the personal chattels, the first $451,909, then 50% of the balance to the partner with the remaining 50% amongst the children.
It is most unlikely that this rule would provide a satisfactory outcome for the surviving partner and a farming child, particularly where there was more than one child. However, if the estate was relatively small and there were no farming children it may be a reasonable result. Keep in mind it will be far more difficult and expensive to administer a deceased estate where there is no will.
Therefore making a will is the most likely way of ensuring your wealth passes to your preferred beneficiaries in the desired proportions.
Yes, a will can be contested and not all of your assets pass to your estate, but both of these topics will be covered on another day.
Before making or reviewing your will, it is critical to fully document the family wealth. In this process you will identify who actually owns all of the assets and who has legal responsibility to repay the debts. At the same time any "impregnated" capital gains tax or superannuation tax needs to be calculated.
Therefore your accountant should always be your first point of call and before making a joint appointment with your solicitor and accountant to review your will. Ascertaining who ultimately controls the assets held within family trusts and family companies will also be part of the assessment process.
Marriage will revoke an existing will unless the will contemplated the marriage. If you separate from your spouse, but are not divorced your will remains valid until you are divorced. Obviously, you should review your will in the event of separation.
On the other hand, if you divorce then any gift in favour of your former spouse within your will is automatically revoked, whilst all other terms of your will remain valid.
The choice of executor depends on the circumstances, but usually the spouse is the ideal choice. Where there is no surviving spouse then all of the adult children, but a maximum of four, would be the next preferred executors.
On death the executors are responsible for obtaining a Grant of Probate for the estate. This document gives the executors power to distribute the net estate assets to the beneficiaries.
In most cases the executors would seek professional assistance through the accountant and the solicitor to deal with the probate application and distribution of assets.
Nominating either an accountant or a solicitor or a trustee company as an executor may be an option. Note that a trustee company usually charges a percentage of the gross value of the estate, whilst accountants and solicitors will invariably render fees for the time spent acting as the executor.
Next time we will look closely at some of the "dos" and "don’ts” of farmers' wills.
Bill Beard is a director of RSM and can be contacted on 53305800 or [email protected]
Important: This is not advice. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur rapidly. We therefore recommend that our formal advice be sought before acting.