While the reading of a will might make for great cinematic drama reminiscent of an episode of Yellowstone and the infamous Dutton’s, a will or lack thereof can cause endless drama for the family and this is why estate planning stands as a genuine responsibility to safeguard the interests of loved ones, businesses and personal affairs.   Unlike conventional estate planning, farmers, especially those with agricultural assets, navigating the maze of nuanced legislation; like the fact that a farm may only be bequeathed to one beneficiary, demands a professional eye and accurate planning.

PJ Veldhuizen, Managing Director of specialist commercial law firm Gillan & Veldhuizen Inc., emphasises the critical role of legal expertise in unravelling the ins and outs of estate planning stating that while a straightforward will may suffice for those with uncomplicated estates, the same cannot be said for farmers whose livelihoods are intricately woven into the fabric of specialised legislation and complex family dynamics.

“There is no one-size-fits-all approach and by taking a more considered, proactive line of action to your estate and financial plans along with an understanding of the legislative directives and implications will go a long way to preserving your legacy,” he adds.

Estate planning for farmers, like other estate plans, has the usual financial aspect like the various taxes, administration costs and estate duties, but the element that makes it different is that in most instances it also involves a family succession aspect.  With estate plans for farmers, the successor of the family business is/was usually either a son or daughter, a parochial standard from yesteryear but one that appears to remain.   Moreover consideration needs to be applied to the unique challenges posed by agricultural assets, such as farms with diverse components like orchards, pack sheds and rental properties.

Understanding the challenges

Farmers face unique challenges in succession planning, primarily concerning the inheritance of agricultural land.  Section 3 of the Sub-Division of Agricultural Land Act 70 of 1970 presents a significant hurdle, prohibiting the subdivision of agricultural land among multiple heirs without consent from the Minister of Agriculture.  So, if you want to leave your farm to Beth, Rip and Jamie, you cannot do so without permission from the Minister, and it is nigh impossible to achieve.  Furthermore if you die before receiving approval on this, it will only add further complications to an already unpleasant period in your beneficiaries lives. “The repercussions of not having a firm agreement/will in place may require the heirs to enter into some kind of redistribution agreement and things can get very ugly,” cautions Veldhuizen.

The family dynamic

But it’s not just about the paperwork; family matters too. A crucial aspect often overlooked, is the involvement of the entire family in the estate planning process. “Paramount is a chat with the family to establish who wants to or will be involved in the operations and management of the farm,” says Veldhuizen.   The way a farmer structures their estate plan has a big impact on both preserving and growing the estate, which directly affects the next generation. For instance, instead of directly leaving a farm to a child in their own capacity, one might opt to bequeath it to a trust, with the child and their descendants as trustees and beneficiaries.

Consequently, the estate plan created by the farmer directly influences the estate planning path of the child, ensuring a smoother changeover and greater preservation of assets across generations. Open and transparent communication is key to understanding the unique needs, objectives and aspirations of each family member, ensuring a fair and equitable distribution of assets.

Planning ahead

While contemplating one’s mortality may not be a pleasant task, to avoid these challenges, pro-active measures are essential.  “You could pop your clogs (or your Vellies) unexpectedly, so meeting with a commercial lawyer who understands the intricacies of trusts, companies and estate planning in advance, will go a long way towards empowering farmers to navigate and secure a sustainable legacy for the family, and with proper planning you can avoid the inevitable family feud,” advises Veldhuizen.

The following options are available to the testator and heirs:

  1. The heirs can create a company/trust whereby the heirs become shareholders/trustees and the entire farm is transferred to the said company/trust. The heirs can therefore work together as co-directors, co-shareholders or co-trustees even though they may not own portions of the farm in their individual capacity.

    “Establishing a company or trust structure offers viable solutions, ensuring a smooth transition of farm ownership while adhering to legal requirements, along with minimising the afore-mentioned taxes and administration costs and to make provision for any shortfalls,” adds Veldhuizen; or

  1. Redistribution agreement – for example, in the case of two heirs, the heirs can enter into an agreement whereby the land is registered in the name of one heir and the value of the one-half share is paid to the other heir. Both heirs must therefore inherit/benefit equally; or

  1. The land can be sold to a third party.

Annual spring clean

Our circumstances, assets and status can change significantly from one year to the next so it’s extremely important to have an annual meeting with yourself and review and rework the administration on your personal estate and adjust the supporting documentation where needed. Terms and conditions, legislation and administrative changes occur across the financial, insurance and legal industries at an ongoing pace, therefore making sure you are up to speed can save you money and protect you from future complications. Your will is a living document and probably the most important one to revisit.  Make sure your executor is still the correct person to appoint, carry your wishes and in the light of changed circumstances, make sure your assets are all accounted for.

Considerations for communal farms

For farmers with communal land arrangements, additional legal frameworks such as the Extension of Tenure of Land Act and PIE come into play. It’s a minefield, and understanding existing rights of tenure and planning for succession is vital to avoid disputes and ensure a seamless transfer of ownership.  For example, explains Veldhuizen,  what are the existing rights of tenure and who do they extend to? If people have lived on the farm for a certain amount of time do they have certain rights to stay, and if so, how far does this go?

In the face of inevitable uncertainties, proper estate planning offers peace of mind and ensures a smooth transition of assets, allowing farmers to leave behind a lasting legacy for generations to come. As Veldhuizen aptly puts it, “Think of it as a gift you can give to your loved ones, rather than something negative. If you plan properly, if you make your wishes known now, then the people who love you will have one less thing to worry about in what may be a very difficult time.”