Intergenerational transfers / Rural succession
Intergenerational Transfers / Rural Succession
Give a little to a child, and you get a great deal back – John Ruskin
In every conceivable manner, the family is a link to our past, bridge to our future – Alex Haley
Property owners – particularly properties that have been owned and managed within the one family for generations – should have succession plans in place to facilitate an orderly transfer of assets to an appropriate family member such as a child.
The inevitable passing of current proprietors may leave disappointed or disgruntled family members who disrupt an orderly transfer of family assets by actively causing family discord and initiating court proceedings challenging wills or earlier property transfers.
Family arrangements which survive evolve through inclusive family discussions, sound legal and accounting advice and are fair and reasonable to all family members.
Current owners who are contemplating transferring assets to a child or other close relative must ensure they are left with adequate financial resources to fund their retirement including future health care. It is as important to ensure that the beneficiary of the transfer is given an economically viable property.
Other assets not subject to the intergenerational transfer may be left to other family members by will or be given as a gift during the parent's lifetime. These bequests and gifts contemplate children not otherwise benefitting from the intergenerational transfers but who are intended to be sufficiently and fairly compensated for missing out.
What can go wrong?
Divorce, death and mismanagement are possibilities.
An apparently happily married child to whom the property is transferred (or partner) strays, becomes distracted or otherwise falls out of favour with his or her partner gets divorced causing a property carve up frustrating Mum and Dad's intention to keep the property in the family.
A transferring parent or benefitting child may die prematurely challenging the financial and management assumptions made when the decisions were made to transfer the property.
Management and financial incompetence leading to premature dissipation of retirement funds or the family property and assets are unfortunately an ever present risk.
Risks can be managed by retaining competent legal and accounting / tax professionals to advise and prepare a resilient and tax effective structure which secures the intergenerational transfer and satisfies the legitimate expectations of the wider family.
An initial trial period to test the viability of the proposal, the bona fides of the benefitting child and the reaction from the wider family can be utilised before finalising the arrangements.
Legal and accounting costs are important considerations. Professional fees charged for sound advice and appropriate documentation should avoid future distressing family disputes and costly unpredictable court proceedings.