Your land might be your legacy, but passing on the family farm isn’t as simple as handing over the keys to the ute. Photo: PeopleImages.
The fences are strong, the soil’s rich, and the next generation is ready — but when it comes to passing on the family farm, a handshake won’t cut it.
Intergenerational land transfers are as much about smart planning as they are about sentiment.
BDN Lawyers Partner Lorraine White says without a plan that looks beyond the paddock, what was once a legacy can quickly become a legal and financial tangle.
“Rural land is very valuable these days, so when people pass away, there can be issues,” she says.
“It’s about ensuring the respective children of the parents are treated fairly — not necessarily equally, mind you, but fairly.”
One of the most common complications arises when some children of rural property owners leave to pursue other careers, while others stay to work the family property alongside their parents.
Ms White says perception can play a big part in what people feel they’re owed.
“On one hand, some may have given up the opportunity to go away and have an external career, and therefore anticipated they’d get a greater share of the estate than those who headed off to do their own thing,” she says.
“On the other hand, those who went off to make their own careers may take the view that the ones who stayed lived rent-free.
“If the child that stayed has a family and built up their whole life around that land, which the parents then split equally, often that child won’t have the means to buy their siblings out.”
BDN Lawyers partner Lorraine White says intergenerational land transfers can become complicated without proper planning. Photo: BDN.
Further complicating matters, children who stay may purchase more land to start their own enterprise and farm it alongside the family property.
In recent years, some farming properties have been placed into superannuation funds, thereby removing them from the estate and subjecting them to super fund rules instead.
Adding to the complexity, ageing parents may need to fund in-home support or aged care, but their wealth is often tied up in livestock, equipment or land, leaving little readily available cash to cover those costs.
There are also more complex ways in which land is held, such as family trusts — a common component of financial management.
Then there are testamentary trusts — trusts that come into effect after a person’s death, with all terms and conditions set out in the will.
“They’re very common these days because they offer asset protection for beneficiaries, to ensure those assets, and any benefits generated from them, go to the intended beneficiary. If, for instance, your adult child marries and that relationship breaks down, you don’t want part of those assets distributed to their ex-spouse.”
Even if the transfer of property itself isn’t complicated, there are many ways to do it — and some are substantially better than others, depending on your circumstances.
You can transfer rural property to a family member during your lifetime, and under the NSW Stamp Duty Act, some exemptions allow it to be done stamp duty–free — a major saving on multi-million-dollar properties. With the right process through NSW Revenue, these transfers are usually straightforward and can help minimise risks later on.
Stamp duty also isn’t payable on gifts, so when dividing an estate, it’s worth clarifying long-term intentions. If one beneficiary plans to buy out another, it may be better to do so upfront, so the entire property can be gifted stamp duty–free from the outset.
Ms White says there is no cookie-cutter answer that works for every scenario, but there are ways to minimise risks of losing the fortune or the family ties.
A discussion with an estate lawyer, particularly for substantial estates, can shed light on the best approach.
“Where I have seen it work out is with families who start the discussion early and involve all affected parties — not just in the transmission of the property, but the holistic estate plan,” she says.
“Circumstances change, too, so periodical check-ins are a good idea.
“You don’t have to get together and make a decision, but starting the conversation about the long-term plan can flush out problems, and you’re better placed to figure out what will work for everyone.”
For more information, contact BDN Lawyers.
