In our third and final article in our series of information for farm businesses, we take a look at four common causes of estate disputes and suggest some strategies to avoid conflict.
#1 – Undocumented and unfulfilled promises: ‘All this will be yours if you stay’ or ‘I’ll look after you later, but we can’t pay you now’. To a young farmer, such promises are crucial to their future financial well-being so they can provide for their family. Such comments should not made, or received, lightly. Disappointed beneficiaries can use the legal strategies of asserting estoppel or a constructive trust to enforce a verbal, or even an implied, promise.
The solution is specific, honest and regular conversations with family members resulting in immediate implementation. Your team of advisers should be notified if you have made promises to a family member, or if an allegation of such a promise could be made against your estate.
#2 – Insufficient detail in estate planning: A simple Will dividing an estate evenly between children, where one wants to own the farm while the others want cash immediately, is a recipe for disaster. The farm might need to be sold, or divided, to fulfil the terms of the Will.
The solution is to work with your lawyer to manage your assets on death, and to ensure that your estate plan is appropriately sophisticated (not too complex, but not too simple either), always recognising that ‘equal’ is not necessarily the same as ‘fair’.
#3 – Mismatch between expectation and outcome: Problems arise where a potential beneficiary expects, but does not receive, an inheritance.
The best way to manage expectations, and minimise potential disputes, depends on the situation and the personalities involved.
One solution is to hold discussions, either individually, or as a family unit. Consider having a trusted adviser to act as a moderator to help keep the conversation structured, civil and productive.
Alternatively, assets can be gifted during life to intended beneficiaries, either directly or via a trust, to reduce the risk of estate disputes. With care, the stamp duty and capital gains tax consequences of such gifts can be minimised. Transferring assets to a trust is a useful way of allowing the older generation to retain control yet hand over the reins to the right people at the right time.
#4 – Out-of-date estate plans: Older documents might undervalue a family member’s work or contributions to the farm’s success, fail to account for gifts made to beneficiaries during life, or appoint executors who are no longer capable of acting.
An estate plan should be reviewed annually, although some of the documentation may not need to be altered quite so regularly.
The final word
The best way to avoid disputes is to include an Estate Plan as part of a broader farm estate plan. Take advice from your team of advisers – whether and how you include your family will depend on your individual circumstances.
Estate planning is such an important step in planning for the future, avoiding disputes and ensuring you protect both your assets and your family. We are ready to start the conversation with you around estate planning to help avoid estate disputes in the future.
Trent McGregor is a Wills and Estates lawyer with Robertson Hyetts in Bendigo, who specialises in farm and business succession planning and estate planning. To make an appointment with Trent, call us in Bendigo 03 5434 6666 or Castlemaine 03 5472 1588.