Photo: Supplied
The reading of a will might make for great cinematic drama reminiscent of an episode of the dynastic series Yellowstone and the infamous Duttons, but a will or the lack of one can cause endless drama for the family.
This is why estate planning stands as a genuine responsibility to safeguard the interests of loved ones, businesses and personal affairs. Estate planning for farmers – especially those with agricultural assets, navigating the maze of nuanced legislation, like the fact that a farm may only be bequeathed to one beneficiary – demands a professional eye and accurate planning.
While a straightforward will may suffice for those with uncomplicated estates, the same cannot be said for farmers whose livelihoods are intricately woven into the fabric of specialised legislation and complex family dynamics.
There is no one-size-fits-all approach, and by taking a more considered, proactive line of action to your estate and financial plans, along with an understanding of the legislative directives and implications, you will go a long way to preserving your legacy.
Estate planning for farmers, like other estate plans, has the usual financial aspects like the various taxes, administration costs and estate duties, but the element that makes it different is that in most instances it also involves a family succession aspect.
With estate plans for farmers, the successor of the family business is usually either a son or daughter, a parochial standard from yesteryear but one that appears to remain.
Moreover, consideration needs to be applied to the unique challenges posed by agricultural assets, such as farms with diverse components like orchards, pack sheds and rental properties.
Understanding the challenges
Farmers face unique challenges in succession planning, primarily concerning the inheritance of agricultural land. Section 3 of the Sub-Division of Agricultural Land Act No. 70 of 1970 presents a significant hurdle, prohibiting the subdivision of agricultural land among multiple heirs without consent from the agriculture minister.
So, if you want to leave your farm to Beth, Rip and Jamie, you cannot do so without permission from the minister, and this is nigh impossible to achieve. Furthermore, if you die before receiving approval on this, it will only add further complications to an already unpleasant period in your beneficiaries lives.
The repercussions of not having a firm agreement or will in place may require the heirs to enter into some kind of redistribution agreement and things can get very ugly.
The family dynamic
But it’s not just about the paperwork; family matters too. A crucial aspect that is often overlooked is the involvement of the entire family in the estate planning process. Paramount is a chat with the family to establish who wants to or will be involved in the operations and management of the farm.
The way a farmer structures their estate plan has a big impact on both preserving and growing the estate, which directly affects the next generation. For instance, instead of directly leaving a farm to a child in their own capacity, one might opt to bequeath it to a trust, with the child and their descendants as trustees and beneficiaries.
Consequently, the estate plan created by the farmer directly influences the estate planning path of the child, ensuring a smoother changeover and greater preservation of assets across generations.
Open and transparent communication is key to understanding the unique needs, objectives and aspirations of each family member, ensuring a fair and equitable distribution of assets.
Planning ahead
While contemplating one’s mortality may not be a pleasant task, to avoid these challenges, proactive measures are essential. You could pop your clogs (or your vellies) unexpectedly, so meeting with a commercial lawyer who understands the intricacies of trusts, companies and estate planning in advance will go a long way towards empowering farmers to navigate and secure a sustainable legacy for the family, and with proper planning you can avoid the inevitable family feud.
Options available to the testator and heirs
- The heirs can create a company/trust whereby they become shareholders/trustees and the entire farm is transferred to the said company/trust. The heirs can therefore work together as co-directors, co-shareholders or co-trustees even though they may not own portions of the farm in their individual capacity. Establishing a company or trust structure offers viable solutions, ensuring a smooth transition of farm ownership while adhering to legal requirements, along with minimising the aforementioned taxes and administration costs and to make provision for any shortfalls; or
- Enter into a redistribution agreement – for example, in the case of two heirs, the heirs can enter into an agreement whereby the land is registered in the name of one heir and the value of the one-half share is paid to the other heir. Both heirs must therefore inherit or benefit equally; orhe land can be sold to a third party.
Annual spring clean
Our circumstances, assets and status can change significantly from one year to the next, so it’s extremely important to have an annual meeting with yourself to review and rework the administration on your personal estate and adjust the supporting documentation where needed.
Terms and conditions, legislation and administrative changes are ongoing across the financial, insurance and legal industries, therefore making sure you are up to speed can save you money and protect you from future complications.
Your will is a living document and probably the most important one to revisit. Make sure your executor is still the correct person to appoint, carry your wishes and in the light of changed circumstances, make sure your assets are all accounted for.
Options available for communal farms
For farmers with communal land arrangements, additional legal frameworks such as the Extension of Tenure of Land Act and the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act come into play.
It’s a minefield, and understanding existing rights of tenure and planning for succession is vital to avoid disputes and ensure a seamless transfer of ownership.
For example, what are the existing rights of tenure and who do they extend to? If people have lived on the farm for a certain amount of time, do they have certain rights to stay, and if so, how far does this go?
In the face of inevitable uncertainties, proper estate planning offers peace of mind and ensures a smooth transition of assets, allowing farmers to leave behind a lasting legacy for generations to come.
Think of it as a gift you can give to your loved ones, rather than something negative. If you plan properly, if you make your wishes known now, then the people who love you will have one less thing to worry about in what may be a very difficult time.
Visit gvinc.law.za.
