Leave farm to brother or wife?

QUESTION: I am a farmer who lives in country New South Wales. I recently had an accident whilst driving my wheat header. Although I wasn't hurt too badly, I certainly could have been. This has made me start to wonder what would happen to my farm if something happened to me.

I assume my brother, who I run the farm with, would automatically take it over. But I wouldn't want my wife and kids to end up with nothing. Is this a common problem? I have been searching the internet to try and find some information but I am not really sure what I am looking for. Should I just put a note in my Will? Do I need to go and see a lawyer? I have left everything in my Will to my wife.

ANSWER: You are right to be concerned about what would happen to your farm. Presumably, your farm is registered as a business in the names of both you and your brother as tenants in common. If so, your interest in the farm goes to your wife should anything happen to you. Your brother would have to run the farm with your wife or buy out her share of the farm at great expense.

Likewise, if anything happened to your brother his interest would pass to his wife or children. You would find yourself trying to run a business (the farm) with someone else who is not necessarily up to the challenge. The worst-case scenario is that you may have to sell the farm. Many carefully nurtured businesses have disintegrated under similar circumstances.

There is a solution. The requirements of a farm are basically the same as for any other business. What you need is something called a Business Succession Plan (BSP). Most astute business-owners have one in place (although plenty of poorly run businesses don't).

A BSP is an agreement between business partners or owners. It details what happens to the business in the case of certain events. Those events generally include:

Death;
Total and Permanent Disability;
Trauma Event (heart attack, cancer)
Retirement; and
Bankruptcy.
Generally, a 'Put/Call option' is used. This agreement allows your remaining partners to buy your interest in the business. Alternatively, your wife can demand that your interest be bought by the remaining partners. This is all backed up by insurance policies that mean the cost of the buy-out is not crippling.

If you want more information, LawCentral www.lawcentral.com.au has an online manual, "Business Succession -- Insurance, Tax and Facts". It contains everything you need to know. In just 6-11 minutes, you will get a document that details Business Succession planning strategies as well as their tax implications.

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