Many farmers and non-farming people, for that matter, have all their property assets in their own personal names or in a partnership. Their perception is that they own everything, and hold it tightly with the mind-set that it is theirs forever.
That may be true while you are alive, but as soon as things start to change with ill health, retirement etc the attachment to the property seems to over-run everything else. The most common thing I hear in succession planning is "I have left it too late".
Let's look at some of the issues. Property is something you only occupy for the period of your ownership. In other words, the purchase price is really only the right to occupy that farm or piece of land until it is sold to someone else to occupy.
Now if you start to look at it like that, it may give you another view of the world and your land. If you separate out the parts of your business, with the land and buildings into a family trust for the benefit of your children, then you are providing a smooth transition of your right to occupy to the next generation, for their right to occupy.
It should be seamless, and will avoid any additional costs. Death duties and stamp duties are zero rated but could come back in at any time, and this could complicate matters. A trust avoids any issues over stamp and death duties.
The stock and plant could remain in your partnership name. The partnership could in turn lease the farm from your own family trust. The rent paid by the partnership to the family trust could be used to service the mortgage on the trust land and provide you with a living.
Now if you have to have full hospital care by the government, and your farm remains in your personal names, they will be able to caveat the property and recover their costs. These costs can sometimes be quite substantial. If however you have had the property in a family trust for 10 years, then they are unable to make any claim.
The division of your assets into another entity also allows you to think about how you might start the succession process to your family. It is ordinarily much easier if the trust owns the property to start a succession plan.
It might be that there are three children, one wants to farm. He can buy the stock and plant, run the business and lease the property from your family trust. He knows he has a one-third share in the property anyway. He receives all the income and the rent is paid to you because you own the right to the income from the family trust for your life.
You can live on the trust property for the rest of your life knowing that you will be receiving cashflow until both parties have died. So technically you have an income from the trust for the rest of your life, but you do not own any property upon joint deaths. And die we will. There is nothing surer than change, taxation and death. The last is the least avoidable.
In summary, identifying the separate assets in your business and giving them different ownership, can improve how you look at things. It gives much better objectivity, and allows you to see things more clearly. It also gets away from "the land and I till death do us part" mentality.
Your children will also see that you are making an effort for trans-generational ownership of your farm property to them. This can be a very enriching experience for us. I know from personal experience, as our children recognise our intent.
That may be true while you are alive, but as soon as things start to change with ill health, retirement etc the attachment to the property seems to over-run everything else. The most common thing I hear in succession planning is "I have left it too late".
Let's look at some of the issues. Property is something you only occupy for the period of your ownership. In other words, the purchase price is really only the right to occupy that farm or piece of land until it is sold to someone else to occupy.
Now if you start to look at it like that, it may give you another view of the world and your land. If you separate out the parts of your business, with the land and buildings into a family trust for the benefit of your children, then you are providing a smooth transition of your right to occupy to the next generation, for their right to occupy.
It should be seamless, and will avoid any additional costs. Death duties and stamp duties are zero rated but could come back in at any time, and this could complicate matters. A trust avoids any issues over stamp and death duties.
The stock and plant could remain in your partnership name. The partnership could in turn lease the farm from your own family trust. The rent paid by the partnership to the family trust could be used to service the mortgage on the trust land and provide you with a living.
Now if you have to have full hospital care by the government, and your farm remains in your personal names, they will be able to caveat the property and recover their costs. These costs can sometimes be quite substantial. If however you have had the property in a family trust for 10 years, then they are unable to make any claim.
The division of your assets into another entity also allows you to think about how you might start the succession process to your family. It is ordinarily much easier if the trust owns the property to start a succession plan.
It might be that there are three children, one wants to farm. He can buy the stock and plant, run the business and lease the property from your family trust. He knows he has a one-third share in the property anyway. He receives all the income and the rent is paid to you because you own the right to the income from the family trust for your life.
You can live on the trust property for the rest of your life knowing that you will be receiving cashflow until both parties have died. So technically you have an income from the trust for the rest of your life, but you do not own any property upon joint deaths. And die we will. There is nothing surer than change, taxation and death. The last is the least avoidable.
In summary, identifying the separate assets in your business and giving them different ownership, can improve how you look at things. It gives much better objectivity, and allows you to see things more clearly. It also gets away from "the land and I till death do us part" mentality.
Your children will also see that you are making an effort for trans-generational ownership of your farm property to them. This can be a very enriching experience for us. I know from personal experience, as our children recognise our intent.
