That was one of the comments made by an audience member at a seminar about the legal and financial aspects of family-farm management, Farming Families - Keeping It All Together, held in Gore last week.
The seminar was organised by the All Points branch of Rural Women New Zealand.
AWS Legal associate Leandra Lambie-Shaw, of Gore, was invited to talk about asset protection and succession planning.
She said it was vitally important for farming families to ensure they had their succession plans, their wills and family trusts, contracting-out agreements and enduring powers of attorney in place to help protect against future disputes or claims made against the estate.
Wills
Miss Lambie-Shaw said it was important to have an up-to-date will to ensure that it fit with your current family situation.
A point that a lot of New Zealanders were not aware of when they were preparing their will was that under the Property (Relationships) Act, the surviving spouse or partner could elect how they wished to inherit under the estate.
They could choose to accept what they were given under the will or they could elect to make a claim under the Act and gain 50 per cent of the relationship property, she said.
When preparing your will, it was important to ensure all children were treated fairly, Miss Lambie-Shaw said.
Otherwise, they could potentially challenge the will and make a claim against the estate under the Family Protection Act.
"The farm is quite often the farming family's largest asset, and which will [usually] be left to one sibling."
"Because of this, you need to ensure that you are treating the other siblings fairly, if not equally," she said.
A properly drawn-up will went a long way towards helping to protect against any future claims on the estate.
However, there were circumstances when a will could be challenged, such as a Family Protection Act claim, Miss Lambie-Shaw said.
A testamentary promises claim could also be brought against the estate if the person making the claim could prove there was a promise made to provide for them in the will in exchange for services provided to the will-maker during their lifetime.
If the agreed provision was not made in the will, then that person could potentially make a claim, although this was a harder claim to make as they needed proof of both the promise and provision of services, Miss Lambie-Shaw said.
Enduring Powers Of Attorney
Miss Lambie-Shaw urged people to consider putting Enduring Powers of Attorney (EPA) in place.
There are two types.
- The Property EPA allows another to act on behalf of the person establishing the EPA in relation to all property matters, such as paying the rates, operating a bank account, handling land title documents etc, while they are overseas or ill.
- A Personal Care and Welfare EPA grants another person the ability to make decisions regarding health and wellbeing on behalf of another when they have lost the power to do it themselves, such as through mental incapacity.
Contracting-out Agreements
The Property (Relationships) Act applied to all New Zealanders and farming families needed to consider the effect of this far-reaching piece of legislation as part of their succession plan, Miss Lambie-Shaw said.
If a couple had been in a relationship, whether married, civil union or de facto, for three years or more and then separated, or one of them died, then generally the Act assumed each partner contributed equally to the relationship, even though it could be in different ways.
"All the relationship property is split equally regardless of contribution," she said.
She said there had been litigation within New Zealand which said "de facto" did not necessarily mean couples living together, although that was more common.
If the couple had an "intermingling of assets and bank accounts", that could qualify, as could other criteria.
She advised couples to enter into "contracting out" agreements, more commonly known as "pre-nuptial agreements".
"It states what happens to property if they separate or one dies.
"It puts structures in place to help prevent against Property (Relationships) Act claims [in the future]."
It also outlined what was considered "relationship property", such as the family home and chattels, superannuation and insurance policies and income earned after the commencement of the relationship.
"Separate property" included inheritances, gifts, property acquired under a trust or before the relationship began and property that was separate under a contracting-out agreement, she said.
Both parties would be required to obtain independent legal advice before signing any agreement so each party appreciated exactly what they were signing, and what provisions and conditions they should include.
Each agreement would reflect each families' unique circumstances and would help protect against future claims being made against the property, no matter what future contributions each made to the value of that asset.
It could also cover specific assets, which one partner might want protected, such as inheritances.
"Some have a review clause so that maybe in five years they will look at it again."
She said discussing a contracting-out agreement was a hard conversation for many couples to have, particularly during the rosy glow at the beginning of a relationship.
"People want to protect against what may happen in the future. Get professional advice because doing it wrong can be costly going forward."
Succession Planning
"Succession planning means putting measures in place to manage the transfer of wealth," she said.
"It is done to protect future generations by managing assets, [to] retain security, viability and adequate income for parents who retire from the farm, and retain economic viability.
"If they have a son [or daughter] who wants to take over the farm, they have to consider if it is viable to pass the assets to the next generation and also whether the other siblings have been treated fairly."
Many farming families established trusts, which were treated as a separate legal entity, to protect a family's assets such as the farm against business risk and relationship breakdown, Miss Lambie-Shaw said.
It also helped guard against claims on the farm when the parent died, minimised tax liabilities and protected assets from relationship property claims, such as from sons-in-law or daughters-in-law.
It also protected against asset or income testing for rest-home subsidies and preserved the assets for the next generation.
She said it was important to have the right structure in place to proof against future claims and, it was important to talk to professionals who specialised in that area.
"There also needs to be open communication between family members to help prevent future conflict.
"Talk to family members and get everybody on board now about what you want to do," she said.