January 14 - 2014
FA R M I N G
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Bill Guest, Farmers of New Zealand Membership Services: 09 439 5219 09 430 3758 Email: email@example.com
Keeping farming in the family The family farm has been the cornerstone of farm ownership for well over a century. The issue of succession can be very emotional for many families. There is an old saying, where there is a Will there is a relation.
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Over Christmas, reading Keeping Farming in the Family, A guide to farm succession, by author lawyer Allan Ross Blackman, was a very valuable read and I recommend it. The majority of us have difficulty in dealing with the issues of testamentary promises, Life Interest Wills, The Inter Vivos Trust, Memorandum of Wishes, Companies, The Succession Plan, Choosing your Advisors, Protecting the Family Farm. The majority of farming families are asset rich and cash poor and if the family farm is to remain an important part of farm ownership, it is important to receive the very best of advice in the setting up of trusts and formulating a good succession plan. Mr Blackman says in his book, that educating the farming client is a vital aspect of succession planning, one that the traditional professional is not inclined to do. The old-fashioned conventional approach by professional advisers has
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been to tell the client what to do, without explaining why and how. In the context of succession planning, the professional who says do it this way because I say so, is not providing an adequate service. The ability to identify what the farmer needs and provide innovative and flexible solutions is key. Simply forming a trust and divesting all your property into it, requires great thought, particularly when choosing trustees. Under the Trustees Act, there are special responsibilities the trustees must follow in ensuring the interests of the beneficiaries are protected. Many farms have been owned by families through successive generations, but there have been a number of law changes where families under the Family Protection Act, have successfully challenged estates and there is case law, in particular the High Court case Scott vs. Scott which was held in December 2007 in Hamilton and twice in 2008 in Rotorua, that makes compelling reading. This family over a six-year period was in litigation concerning the fate of two farms which had been in the family for many years. In summary, the plaintiff was Mr Lewtyn Scott and the defendants were Lewtyn’s mother and his three sisters. Lewtyn Scott was encouraged by his father and mother to return from London to take over the main family farm. He purchased his father’s half-share in July 2000 at the registered valuation and his mother promised him her half-
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share of the property. He paid $36,000 in interest on the money he borrowed from his mother, up until October 2004 when the family became involved in litigation. He would have thought having paid fair value, that he had an entitlement to the increase in the value of the half-share of the property that he had purchased. Because of the significant increase in the value of the farm land at the time, Lewtyn’s three sisters were concerned that his acquisition of the farm had disadvantaged them. It is also ironical that Lewtyn’s mother in 2002, had promised in writing, to transfer to him her total interest in the farm and that she would make provision in her will to forgive the debt. Her letter concluded — in the meantime you can regard the farm as yours. The letter omitted one important piece of advice, that the second farm had already been transferred to Lewtyn’s three sisters to his exclusion, which he did not accept. The issues surrounding this case were complex but after six years of legal dispute and hundreds of thousands of legal costs, Lewtyn was told by the judge that he had to give back his half-share of the main farm and his mother was not obliged to sell him the other half. The importance of having the legal structures correct, and clearly documented directions as to how the family succession plan will work is important. When the court’s get involved the gloves are off. Ian Ross Blackman’s book Keeping the Family Farm, A guide to farm succession, is a must-read for all farming families. For further details regarding the book, contact Farmers of New Zealand. ¢
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Published on Jan 13, 2014
Published on Jan 13, 2014
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