(00:57):
Hello and welcome to episode 19 of the Art of Estate Planning podcast. So Carrie and I are still putting our feet up on our summer holiday and we are just still having a bit more r and r getting ready for a big year ahead. So this week's episode is another dig into the archive and we've gone back, I think I've found one of our most interesting estate planning presentations all about succession planning for farming clients.
(01:26):
Now, Carrie and I are both kind of country girls. I'm based in Vanderberg, which is quite rural in Queensland, and Carrie grew up out West Roam away. But for this topic, we've actually brought in the beacons. So you'll hear Nicky Grummit as well as Claudia Maw. And as you can see, they are both estate planning specialists. They're both highly experienced in rural succession planning and they really know their stuff. So we dug this up from one of our Facebook live trainings from the Art of Estate Planning free Facebook group. If you are looking to brush up on your estate planning training over the break, you've got nothing better to do. Jump into that Facebook group because there is a extensive training library. It's all free. And as you can see, we have some really special guests who are so generous with how much they share. So I hope you love this episode as much as I do. Enjoy!
Carrie (02:25):
We've got Nicky and Claudia here today, two of our superstar estate planning teams. If you want to introduce yourself guys and give us a little bit about you. So Nicky, you want to go first?
Nicky (02:35):
Sure. Thanks so much for having me. I am an estate planning lawyer based in Goondiwindi, Queensland. So we're on the Macintyre River, which means we've got a lot of clients in Queensland and New South Wales on the border and we also operate in the Northern Territory in South Australia from time to time. We're on a micro firm. I'm here with one other lawyer and another four team members and we've been operating since 2018 but have recently expanded out from just the estate planning and estate work into business services as well.
Carrie (03:17):
Hey, Claudia.
Claudia (03:19):
Hi everyone. Thanks for having me. Carrie. I'm Claudia Maw, my firm is Demeter Legal. So we are based in Albany, Western Australia, so diametric opposite to Nicky in Queensland. I've been in business as a lawyer down here since 2013. First is South Coast Legal commencing and now is Demeter Legal. Demeter Legal is more of an online firm, so we moved into that online space. I specialise in estate planning and agribusiness, so work with farming families all around the great southern, southwest and lower wheat belt. But we also offer estate planning services and business legal services for clients all across WA and also into the Northern Territory and South Australia as well.
Carrie (04:06):
Beautiful. Now, in terms today say more of a q&a bit of a panel sort of approach. So as said, keep the questions coming through now we've got a list of questions I thought I might give to you guys and then see how you go with answering them. Certainly feel free to take the conversation in a direction that makes sense for you. But the first one I wanted to know was what are some of the particular challenges or differences associated with the estate planning for farming families?
Nicky (04:34):
I think probably some of the differences with dealing with estate planning for farming families. I remember when I finished my law degree and really wanted to do work with angry business clients, it's really about the client base. It's not like an area of law particularly I think it's about the clients. So generally they're often high value, low return assets, big chunky high value assets which are sometimes difficult to split up due to the low return and the viability. You've got strong emotional attachment to the assets and I'm seeing more and more either really for wanting to hang onto those assets for the next generation or very strongly not wanting to hang onto those assets for the next generation in terms of encumbering with them with it. What else do you think, Claudia?
Claudia (05:32):
Yeah, I think you've really touched on an important point there with the emotional ties and I'd say particularly for farming families as opposed to any other business family or family business, there's a real emotional time not just for the people who are in the business but people that are in the family but not in the business. So your non-farming children often have really strong emotional ties to the land, to the place, to the lifestyle, but they don't have that investment in and connection to the business itself or they did and they've left. So you're dealing with a lot of competing emotional need and not just the business succession side of things. So I think that can be quite unique to farming families. I think you are very right on the fact that often you have very land rich entities or land rich families, but that doesn't translate into the ability to give everyone an equal share of the estate because the land sort of sits there and it holds its value, but you don't want to chop that up in an estate planning scenario.
(06:43):
And I think the other thing is that I sort of alluded to that, but you've got often you'll have sweat equity and when you're doing your estate planning you've got to be very conscious of promises that were made to people who may have been involved in the business, may still be involved in the business versus what can actually be done with the assets and with the structure. So it is quite a, and as you say, it's a very much people first rather than looking at it as discreetly estate planning, you have to look at the family as well and really consider all of that.
Carrie (07:17):
Claudia and Nicky, we've just had a really interesting question, which I picked up straight away as well. It's determined that not everybody's used to, but someone asked what sweat equity is, if you wanted to explain what that is.
Claudia (07:27):
Yeah, sure. So sweat equity is where it's quite common in startups as well where someone may have worked in the business for less than award rate pay on the promise that one day this will all be yours, my son, that sort of thing. So where someone has invested a lot of time and effort into the farm and hasn't necessarily been compensated at the level that they should be under the award necessarily or at a rate that might be paid to a third party. So if you had a farm manager come in, you'd have to pay them at a certain rate to be able to get someone a, to meet your obligations under the award, but also to get someone viable to come and manage your farm well, if you had say a son or a daughter who was doing that job for you, you might not be paying them at that rate, but they're doing it on the basis that one day they'll take over the farm and they'll be in control. So that's what we mean by that term.
Nicky (08:24):
Something else I feel that's really there's a legacy of in this area in estate planning for farming families is I feel like there's a really long history of bad succession stories, like bad things that have happened and bad results and bad falling outs of family that you're almost up against before you even get into it. And I feel like it's really good to sort of set the ground rules and be dealing with it from a fresh perspective to sort of counteract really there's so many stories about it and about probably there's some really skilled succession facilitators out there, but there's a bunch of less experienced facilitators out there too that might not have had overly favourable results. And I feel that there's real legacy there in this area that I think you've just got to be conscious of that people are almost going to be a bit apprehensive. They're going to be on the defence a little bit sometimes.
Claudia (09:28):
Yeah, a hundred percent. So I have a farmer here that there was no discussion at the sort of patriarch level, no discussion whatsoever as a family and there would be little remarks to we've got one farming child and then three other non-farming children. There would be little remarks here there and it's nothing cohesive. And because of that, now that the business owner is coming into the ownership of the land, when I met them he didn't have a will and he was 55, he had nothing because his experience of or succession planning or lack thereof with his own parents was so poor it just turned him off from doing it. And we've been working over the years to really get them into the mindset of this is your time to flick that script and to have a really good discussion with your children about what happens next. So you are, as you say, Nicky often working up against prejudices and poor experiences as well.
Carrie (10:32):
Yeah, I know a family that don't talk to certain people because of a generational thing that happened three generations ago. So you definitely have some unique challenges. How do you think estate planning advisors can make sure that they're providing a holistic solution for these clients? Because as we know as estate planning lawyers, a will is just a will. Estate planning if you're going to do it properly should be holistic. So what do you think that they can do to help make sure that that process is holistic?
Nicky (11:02):
Do you want to take this on, Claudia?
Claudia (11:03):
Yeah, sure. So I think that there's obviously a need to work with other advisors in the farming business, whether that's the accountant, financial planner, if they have one agronomist, all of those people because I think that gives you a much better picture of where everything is. I think you have to obviously be aware that often you're dealing with a lot of different entities, so there might be a farming trust or a company that the actual farm is run through and then some of the land might be in personal names or it might be in a different trust. So getting that picture is so important and often clients will know that, oh yeah, we've got this trust or that trust, but if you're dealing with a lot of different land locations and lots and that sort of thing, hopefully the accountant will have a really good picture for you of which titles go with which trust and that sort of thing. So can a bit more, we can be more accurate in your approach. And I think the other thing, and I'll let you touch on this, Nicky is looking at it from a, it's going to be a living process. It's never just one and done, it's as is with the estate plan, but particularly with succession planning, you're looking at it from a much longer viewpoint I think.
Nicky (12:21):
Yeah, yep, absolutely. I agree completely. I really feel when it's done well that I know we all talk about having living documents and that they're for now. But I find too in really dynamic farming families, particularly where there's more than one immediate family involved, that it's really great we sort of doing annual checkups to see if things have changed, what has changed, does the estate plan need to change or is the overall structure still a sound? But those little check-ins I think are really helpful, especially if a family's in that period of SLX where they're moving to transition to the next generation or they're in the throes of it because it's generally not something that you'll knock over in a few weeks. It's something that's going to take months and probably years in terms of having things structured properly to enable tax and duty effective transfers and to just have everyone feel very comfortable with the process and what's being put in place. And sometimes it's good to take baby steps so that everyone can feel comfortable and move forward without feeling pushed into a more rushed.
Claudia (13:43):
Yeah, absolutely. I think you need to be looking at what can we do now? What can we as lawyers put in place now, but also what can we suggest that could happen in four or five years time? What can we draw the family's attention to? What strategies can we suggest for 10 years or 20 years down the line? So you're taking such a long viewpoint and I'm fine with estate planning for a more traditional family you would put something in place as you say for tomorrow and then it's more a case of checking in and saying what's happened. Whereas with farming, with succession planning for farming families, it's more what's going to happen. You have to be really proactive with them and yeah, you want to be the one pushing that and checking in and saying and checking in with the accountant saying, has this change been done? Have we put this person into this company or has this person come into this partnership or that sort of thing so you can keep tabs on where things are and then how does that move you into stage two of your, that sort of thing. So it's quite a proactive role I think as opposed to a reactive one.
Carrie (14:58):
I want to check with you both if it's okay, we talk a lot about an estate planning about being collaborative and working together. Who would you see as being necessary to be in that room to be having a family or a conciliatory type of meeting?
Nicky (15:13):
Yeah, I think it's really family based. I've got one coming up where we're going to have parent and immediate children and one spouse, but we're pulling it up there to just sort of the people that are either immediate family or immediately involved in the business. But when I say that there's also going to be a financial advisor in the room as well. I think that's a really important part of the succession planning process for farming families and other families as well. Outside of this space, I don't think we could sit in that room and successfully talk about options forward or alternatives or viability if I didn't have the financial advisor there as well. So that sort of perspective. And then I think it can be really, sometimes it can be really helpful. Sometimes it can be really unhelpful to have all of the extended family in the room. I think you've got to get a real fit for it and decide what's going to be the most effective because really at the end of the day your goal is to have some kind of transition and also still have everyone sitting at Christmas lunch every year.
Carrie (16:25):
It's a little bit like that, isn't it? How many people do you need in the room to make it work but not have too many cooks?
Nicky (16:32):
You have a really strong lean towards utilising communication specialists or do you want to talk about that a little bit?
Claudia (16:40):
Yes, so I have trained in collaborative practise with Zinta Harris at Resolve Estate Law and in the context of succession planning, I think it's amazing. It's amazing way to get people in the room and to get them to talk about things that they might not necessarily want to talk about. I think sometimes the accountant for the farming business is very much aligned, not aligned, but depending on, some people might not have a great relationship with that accountant, they might have their own accountant. So we're talking about different generations having their own accountant and I think that the collaborative practise is set up so that you have neutral professionals who come in and provide that advice in a very independent way. So you would have a financial neutral who can provide that advice on financial need for the various generations and your off-farm children as well.
(17:39):
You would have a communications coach potentially as well. And particularly where succession planning is something that farmers have shut down throats a little bit and they may have attempted to go through the process before, but it may not have worked very well. In my example, my family, there was no communication about it in a useful way. It was much more he said this and she said that and that sort of thing. So having a communications coach, you can help people with the way that they talk to each other because obviously we're dealing with families and you tend to get entrenched in, you've had this relationship with your parent or with your child all your life and you may have developed some unhealthy ways of communicating, let's put it that way. So the communications coach can come in and help you reassess how you discuss things. You'd also have potentially a mediator who would manage the process. So they're the one driving the strategic planning and making sure that everyone stays on task. So I think that it's a really useful way, particularly where you have that family conflict that it just allows people to be supported in the discussions more than they might be if they're just sitting in a room together and trying to discuss things the way they've always discussed them. So yeah, I'm very hopeful for collaborative practise in the succession planning space. Excellent.
Carrie (19:11):
In terms of thinking about other solutions, I mean someone's got a question here and it's certainly something I'm interested to get your feedback on. What are some of the solutions and other tools that can be used? So someone said here, what typical options are there available where you've got mom and dad, a farming family, the main asset is the farm and only one child works on the farm and obviously they're wanting to divide things evenly. What sort of options do you think we have for a scenario like that?
Nicky (19:39):
Yeah, I was reading that. I think it's a really good question. I think that there's definitely not one answer. My first question for them would be what does everyone want in that? I think once you get to the crux of that question and delve into it a little bit more, sometimes it's not that everyone wants an exactly equal distribution of the estate, it can be that they might want more help earlier on and less asset later on, that sort of thing. I think it also comes down to what the parents want. If they want to divide the estate evenly, then I think they can do that. And then maybe it'll depend on the viability of the operation, whether or not the operation can support transferring. How many say there's three kids? So what we're talking about is potentially one farm child having to essentially buy out their two siblings.
(20:36):
So does the viability of the operation lend itself so that can be facilitated or does it not work that way? We've got so many different tools at our disposal for this depending on what the goals are, but you can look at intergenerational transfer while they're alive. You could look at some kind of gifting to the farm child and then being paid out for the other shares to then gift to the other children. You could look at building up assets off farm to where the equal shares doesn't actually impact the farm viability as much in a self-managed super fund or other investments. And then you could also look at if they're wanting to do an exact split now and they want, I had one recently where they're wanting one child to take the farm and the farm's worth more than a third share, so they're still giving the farm to the farm child, but on the basis that he pays out his sibling a top up, so it's like a conditional gift, a gift conditional on him funding the payment of one of his siblings and they're fortunate enough to have enough other off-farm assets that they don't need him to be able to pay out two thirds.
(21:56):
So we do see a bit more conditional gifting. I know that that's an area that can be probably riskier, but I feel like the benefit is really there in terms of the risk.
Carrie (22:08):
Yeah, I think I usually say, and sorry Claudia, I'll let you jump in a second. I think you're absolutely right. What we said earlier about you really don't do anything without the financial team involved and particularly where you're doing this sort of conditional gifting that number one, looking at making sure you've determined how they're going to work out the value of the property if one kid is going to buy the other kid out and making sure you've really hardwired that into the will if that's something that's really important to the family to get that certainty around how that's calculated. And also I often find obviously depending on the size of the particular farm, but having some sort of contact and communication piece with the financier for the operations as well because often those things again are intergenerational and making sure that they're in communication so when it's their turn to buy out the farm, they've got the right person there to help 'em fund that purchase.
Nicky (23:03):
Yeah, I can just see a question there. Is it conditional gifting in the will or current? Yeah, I was talking about conditional gifting in the will and we've basically given them a two year period to be able to arrange finance and facilitate the funds. But you could do it current too. You could do an intergenerational transfer that's partially by gift, partially by them going and getting finance for the remainder.
Claudia (23:28):
Yeah, you could also set up something like an annuity. It gets called an annuity a lot, but it's not technically annuity where it's like an annual payment from the child to the parents after the transfer happens so that money can then go into the estate and be available for other children. I think there was a sort of a follow-up question here of how can you do an exact split when one child is working on the farm or I suppose my question is why are we doing that? I sort of agree with that. I say to a lot of my clients, fair doesn't mean equal. You're not necessarily going to be able to get an exact equal split where you have one asset that comprises the bulk of your estate and other assets hopefully that are of lesser value. So I think having the conversations is really important and as you say, the off-farm kids might be happy with the fact that they're getting a house in Perth or Albany or whatever it is and that's fine and because you've had that discussion, everyone's aware of what's happening.
(24:32):
I think the other point that I wanted to make is when you're giving someone a farm, you are also potentially giving them a lot of debt as well and you're giving them uncertainty and that you're giving them a business model that doesn't always thrive depending on climatic conditions or international commodities markets, there is so much unknowns in the farming space, there's no guarantee that that kid is going to then run off. And I think it's knowing your beneficiaries and knowing whether is that kid going to run off and sell the farm the minute you've popped your clogs or are they genuinely invested in carrying this on and making a living from it and then passing it down to their children as well. So having these conversations is so important because it's easy for us to assume that the kid that gets the farm is just going to sell the farm because land prices have gone crazy and that's who wouldn't do that. Or to assume that the off-farm kids are going to be really upset if they don't get an equal share. So I think that's always got to be the starting point. And so having family meetings, whether a more traditional model or a collaborative model is so important.
Carrie (25:48):
Yeah, I mean someone's brought up the really important part here about what about the commitment of the child that's been on the farm, as you said that's been putting in that sweat equity. How do you acknowledge that especially if one child is to receive half the share of that property but isn't putting anything into it, some interesting ideas there. Is that something that you've turned your mind to before?
Nicky (26:11):
Yeah, I've seen it valued at a market rate like what a market rate salary would've been through that period. I've seen people look at the opportunity lost, what else could they have gone to do to generate income that they haven't done because they've been there and supporting the first generation in continuing this operation that this legacy that they've built. But in the end of the day it's like most valuations, it's just about coming up with a bit of a formula that everyone's comfortable with and then sticking with it.
Carrie (26:38):
There's a couple of questions that have come in. Someone's asked a question here about specifically, do you ever prepare a windfall deed that if one child is going to receive a larger share than the others, that part of the sale proceeds if it's sold within a certain number of years, come back to the other children?
Claudia (26:55):
Yeah, I've actually done that quite recently where we've done a deed, a family arrangement effectively. So this was a case where we were able to get the, one of the kids is now off farm but spent 20 years on the farm. There's another family member who's currently running the farm and then there's a few off farm kids as well. And we got all of them together and said, look, this is the plan. And fortunately they're all very happy and they love their parents and they want to do whatever makes their parents happy. So there weren't any arguments or anything and yet we've just said, look that effectively the farm goes to this one person effectively, but if that farm is sold within X years of the death of the patriarch and matriarch, then they are to pay X amount to these other people. If it's so say it's five years, say it's 10 years, then that percentage goes down because they're the ones that have been putting in the work for that longer period of time. So it was actually a really good one and I think it really helped to allay any fears on the part of the patriarchal matriarch that that's what would happen. And they love their family member and they trust them and they've been told by that family member that, no, this is it, this is me. But things change. Life happens and they might decide to get out of that operation.
Carrie (28:25):
Yeah, someone's asked with that type of deed, you registered it, does it act like a caveat over the property might not experience because you don't register them and it doesn't really act as like a caveat because I'm in Queensland obviously, so Nicky, but Claudia is a wm. We have listeners all around Australia that the title doesn't like you putting on caveats for fun. So you have to really, really careful and you could be liable for costs if you just go through caveats everywhere. So I would just be really, really cautious of that and looking at your other obvious contractual rights to inforce it if something did happen. I also think what's really relevant here in talking about this concept of the value of an interest in a farm is that it's all only value if you can find a buyer. If a kid wants to get off a farm in a hurry because they've just had enough or it's no longer physically they can't do it, something like that. I've seen families for years stuck on properties that didn't want to be there because they don't have buyers. It's even harder now because of the way that Australia is putting in all these regulations around foreign ownership of things like that as well. So it's harder for international buyers to come in and so I think that's a really important thing to think about that it's only worth that market value if there's the market.
Nicky (29:47):
It's a good time right now in ag I think to be doing succession planning. You don't see a lot of activity in this space in drought for example, until, unless it's under pressure. Whereas in good times when there's more cash available to facilitate different deals where lands worth considerable money at the moment where there's more flexibility with banking and finance arrangements and stocks worth good value, then there's a lot more opportunity
Carrie (30:20):
In terms of the point that someone else has made as well. I find it interesting that someone has mentioned that what we also have to think about in that concept of value is that the kids that's walked away with a million dollars of cash rather than the farm, there's lots of investment opportunities for them as well that they get that flexibility that the farming kid will never get. And so making sure as a part of that collaborative approach that you're explaining that to that child as well because they might agree with the way the split happens or the valuation process, but when you really break it down for them and say you can spend your million dollars however you want compared to this kid that doesn't get anything up the land they're standing on, which is valuable if someone wants to buy it or you work your butt off on it, there's a lot of value to be gained there by educating the parties as well.
Nicky (31:16):
Yeah, that goes back to what Claudia was saying before about the holistic approach and having the neutral professionals come in to give their perspective. I think that can really help in that situation.
Carrie (31:29):
And it's been raised here a couple of times, especially in the comments that equal isn't always the right answer. Sometimes it's courses for courses. So one of the things I wanted to talk about and get your input on today is in families where succession planning discussions have failed, so things have got to a point where there's just not going to be a resolution between the parties on something they all agree with. What options do we have to get something in place for these families to get the test data, the peace of mind to know that at least what they're doing is getting somewhere?
Claudia (32:06):
Well, I think it goes back to using the model available through collaborative practise is a really good way to do that because you're not just dealing with the numbers, you're not just dealing with your accountants, financial planners and lawyers, but you're also bringing in communications coaches, potentially counsellors, particularly if there's been a really rough road and things need to be talked through before we can even get in the room to have the discussion about the succession planning, we might need to do a little bit of groundwork with our clients and their families on getting them to a place where they can actually discuss this. So being open to bringing in professionals outside of the traditional succession planning model I think is really helpful for us as if we are the ones that's steering the project, then it's something that we have the flexibility to do.
(33:01):
I think the other thing is it's really, it may take a long time and I think that's where with lawyers, when we're approached by a client, we kind of want to get things tied up in a nice bow because we have worries about our liability potentially. But recognising that this is a process that often takes several years with a family and even with a family that's on good terms and good standing, the process may take over a year to two years to get everyone sort of on board to do things in the right time. As I said earlier, Nick, you've got to take into consideration tax consequences. The accountants will know when's the best time to do X, Y, Z because it'll have the best tax outcome for the clients. So it is really just being patient and knowing that this process will take time, but that it can happen and that it can happen for any family, even families who have struggled previously.
Nicky (34:02):
Yeah, I find that sometimes really helpful too to actually have the, I mean there's circumstances where you're always going to recommend that everyone gets independent legal advice in the example of a deed of family arrangement, but I actually find that quite helpful. I feel like it can move succession planning process that's sort of got off track. You can get it on track by collaborating with the other advisors in that generally everyone often wants something pretty similar. You can just work with the other advisors to help the clients, then sometimes that can help you get there.
Claudia (34:44):
Yeah, I think you're right. Often people will come and they want you to be the sole lawyer because they're very mindful of costs. But having someone, and I think either in a traditional model or a collaborative model, everyone having their own lawyer is really helpful because it's just having that person to nudging people into making decisions and not letting things draw out too long or fester and really having someone on that person's side saying, what are you thinking about this? How did you feel about that meeting? Was there anything that you didn't say that you wanted to say? And bringing that back into the conversation. So a hundred percent agree with that, Nicky,
Nicky (35:26):
That people feel really confident that they're not making silly decisions or they're not just giving into something that they've got good and independent advice and they can feel confident to make those decisions instead of bearing their heads in the sand.
Carrie (35:43):
I sometimes think more lawyers, more problems guys, but I think this is one of those situations where we certainly need absolutely with independent advice. I totally agree that's really important in families like this. But as you said, I think it can also be a bit of a reality check sometimes as well that lawyers can you the people truth about what might happen if you just can't get it sorted. So it is one of those times that there's a really good question here, and I certainly don't know if I know the answer, but I'm happy to hear otherwise people are asking about whether there's any courses or training about how to facilitate those sorts of processes. And I mean first thing obviously that comes to mind me floor, you raised it before, is Zinta's collaborative approach. I almost feel sometimes that it's definitely a really psychology based approach that you have to do to these sorts of things. So I don't think anything in that realm would go astray. Is there anything nickia that you know about?
Claudia (36:40):
That's really the only thing off the top of my head. And obviously that's not specific to rural succession planning, but it's very helpful because it does is in this course, it's two part course as your standard course and then the advanced course it does really dive into the psychology of why people make decisions and negotiating in different ways and that sort of thing. So I think that's been really, it's a very, very useful course if this is an avenue that you want to pursue, I would imagine that there are a lot of focused groups that might do things. They're probably more focused at farmers than more than the advisors, but if you can get on one of those, you're seeing it from your client's perspective. So I think that that's pretty useful.
Nicky (37:34):
Yeah, I was going to say the same thing. I'd be like throwing yourself into your local grains group into your local livestock group or whatever's going because they're the ones that are out there seeking it and I think there's plenty on it. There's some really good guides out there. I was just trying to think which industry bodies we've put them out. I think there's a GRDC one, a grains one that's really interesting. The dairy industry has really fantastic legal resources that they're called digging themselves.
Carrie (38:03):
I think they're really unique scenarios and you do need to understand the community that you're advising in having lived in both romer and chinchilla, getting amongst the community and understanding the things that are particular to that area and to those people as well. We can do all this training we like, but we have to understand the market which understand the target, what's happening for them. I'm just going through the questions a couple of people from New South Wales saying in relation to our deed of family arrangement that they think interest in land. So it is habitable down there and certainly your agreement can say that it is happy to hear that definitely in Queensland, not in New South Wales. So someone might have said suddenly, which is absolutely true when you go...
Claudia (38:49):
We were talking about it before we started.
Nicky (38:52):
That's why we talk about the ray. You have to know whether or not it's going to be good if it rains or bad if it rains. You have to know what time of year it is, whether or not it's harvest, whether or not it's picking, whether or not it's branding. If you have someone you can ask where we ask so that I'm not asking a stupid question or trying to book a meeting at a stupid time, alright, and get ready on rainy days, that's all you do. They sit in their office and they're like, great, what jobs can I get done in the office today in again just get ready for...
Carrie (39:28):
Absolutely. I actually think that farming is one of the biggest gambling jobs I've ever seen in my life. You're gambling on things that you have absolutely no way of predicting or understanding or controlling. And when you realise that and you're talking to these people, you see why it's so emotional for them because there's all of this intergenerational stuff tied in with stuff they can't control, which must be really, there must be something that they think about all the time. Noting that we're coming up towards one o'clock. I think what I wanted to check in with you both is that have you got any advice or feedback for people that are dealing with, because I think the worst case scenario is we could probably manage if we're new to farming families, some simple sort of things, as you said, sort of conditional gifts and whatever else.
(40:22):
If you come across a group that is, you've got land over in this trust, you've got water allocations over in this trust, you've got the actual business in a company that's doing all the cattle running or whatever else, and you've got the plant and equipment in another company that boxes everything or what sort of things or what pieces of advice would you give to people that are looking that come ahead on with one of these obviously only practising things that you're comfortable with? Is this the first one? But is there any tips or tricks that you have in the back of your head when you see something like that?
Nicky (40:59):
Yeah, you have to really get into the documents and understand what's going on. You hear people banging out about this all the time, but you need to read the source documents. I wouldn't do anything without seeing the deeds and the constitutions and the variations. We go through all of that and then I don't touch anything without seeing the financials because all we need is some good beneficiary accounts or some entity loans just to undo everything. I think you've got to understand all the tools that are at your disposal. Just because you're doing estate planning doesn't mean you're only just going to move back your will on your dream parent attorney and your de of family arrangement. I often still use leases, loan use, sorry, land use agreements plan use agreements, all sorts of other types of agreements to facilitate whatever the plan is that they come up with to either add CT to facilitate some kind of arrangement that still satisfies capital gains tax, small business requirements, but also gives everyone pretty well the deal that they were looking for. Don't go into it without a good tax advisor behind you. Don't forget the duty. Yeah, you're going to be broad.
Claudia (42:21):
I think you do have to have a real commercial mind as Nicky says. You really have to look at it from the perspective of the business, your will and all of that. That's your last document. You've got so much going on or so much that could be going on before you get to that point. So having that overview and having a knowledge of those various different types of agreements, it can help to free up money. So where someone is not confident about doing a family farm transfer now maybe they'll lease something to the family member. So they'd be leasing land or they might be, we've done a couple of years ago we did, it was like a land lease, a livestock lease, a plant equipment lease, and that's leading into the handover, which is going to happen in a few more years. So it's just letting your clients know that it's not something that they have to do right now and the handover has to happen now or when they die. There are different ways that they can lead in and giving them certainty about the plan as well. By doing this kind of interim arrangements as well, it's so important. So having a really good commercial knowledge of leasing, licencing, as you say, access rights, all that sort of thing, having a broader knowledge of a agribusiness law, it is really important.
Carrie (43:50):
We are really the facilitator for a lot of other connect points to bring everything together for the estate plan. I mean, I work at a few different law firms and one of the clients in one of those firms just always buying things, land water allocations. But I finally got it drilled in that anytime they go to purchase anything know so that I can give them advice on which entity to purchase it through to suit the estate plan. So I think that proactive planning is really important as well for any new purchase or support, any disposal. So you can adjust things if you need to and that requires having a really great relationship with the family and an ongoing relationship with the family and a great relationship with the financial team as well. So in professional services, sometimes we like to make jokes and we like to pick on all the other types of professions, but really we're in it together. I mean, someone said it down here, don't go it alone without proper financial advice in documents and don't do, which sounds like every single estate planning issue. It absolutely is that it's just obviously got these unique features that you only get with those sorts of things.
Nicky (44:57):
Yeah, we all know what it feels like when you're brought into something at the tail end of the deal. Get the other advisors, the other professionals involved with you quite early so that they can have some input so that they can feel comfortable with it. Don't be doing it. Stitching up a whole deal and then bringing in the accountant or the financial advisor or the banker or someone to try and say, "Okay, ready. Let's do this". It's nothingless.
Claudia (45:25):
No. This could be some of the most rewarding client-relationships that you have because there is so much invested on the part of the family being kind of invited into that is just so wonderful. And I think that you really have an opportunity to build really long standing solid relationships there. So yeah, make sure you do it right from the off and get everyone involved and make sure you are doing all your due diligence as well. But yeah, but the payoff is enormous, not just financially.
Carrie (45:57):
I think people, until you go through the process with a big family like that, that are so emotionally connected to what happens, the value you provide really can't be put in numbers in many ways. I've just got a question here again, keeping in mind our timing. Someone's just asked here, do we think that there's a growing attitude from the next generation to kind of push out mom and dad, finding that balance between obviously them wanting to know that they've got certainty about what's going to happen with the stuff they've done versus the parents obviously needing secure financial future?
Nicky (46:31):
Yeah, I would say my experience to date has been the opposite. I would've thought that there was a growing attitude from younger generations make sure that their parents past secure in their financial future. I think there's a growing confidence or a growing attitude to be able, I'm getting more and more younger generation coming for the independent advice piece. I feel like they're confident, they're more aware, they're more informed and they want to be informed. They want to know what they're taking on. They want to be happy about it. It's not just a, here it is and yes, I'm happy to what, but I wouldn't say I'm seeing more wanting to push mom and dad out.
Claudia (47:15):
I agree with that. But I wouldn't say that there is sort of an attitude of, okay, well you've had your time now off you go. Very often there's a sense of how do we honour and ensure that are taken care of even if you are not connected legally to the farm anymore. And that's been my experience recently. I have a client who owns much of the land part of its own through a trust, which the parents are still involved in. And with changes to the work health and safety regime in wa, I've seen actually a bit more of an increase in trying to push the parents out, but more to relieve them of any liability in that space. But how do we do this in a way that honours their gifts to us? So we've done things where, and I think often as was the case here, the sandwich generation in the middle is quite willing to pay tax duty, whatever it is to ensure that the older generation has those assets that they can be certain will help to fund their retirement and make sure they've got somewhere to live, make sure that there's provision for aged care if they need it, that sort of thing.
(48:38):
So I think perhaps it's that growing awareness of the responsibilities of being in the sandwich generation that people are now not just, they're not taking things that it's how do I keep caring up and down and make sure that that's taken care of. So yeah, I'd agree with you, Nicky. I don't think it's comes from an image of place at all. I think a lot of it is very positive.
Nicky (49:03):
That was probably us too though, in that we wouldn't really be interested in acting for clients that were wanting to do that either. That's true.
Carrie (49:13):
I've definitely seen a situation that someone's talking about here happen before, and as you said, we tend to be able to, or fortunate enough to pick our clients in a lot of instances. And I imagine that as the planners, we don't see as much of the litigation that stuff like this can be preempted by. I just wanted to say thank you both to Nicky and Claudia for joining us. It's been really insightful hearing what you're talking about there, and certainly great to see the level of dedication that you both have to making that plan, that process holistic. I think that is something that we're always screaming as estate planning practitioners and it's nothing more truer than in this sort of scenario.
