Handing over the family farm or business is a massive decision and there is a lot that must be considered to ensure the desired result.
Often this can be an extremely emotional time and dealing with family to reach the right balance can be challenging. We frequently deal with clients who have gifted property without taking all matters into consideration and regretted it later when their lives are significantly affected by the pitfalls.
Give thought to what you are trying to achieve
Are your goals purely financial (eg entry into aged care facilities, possible receipt of an age pension, and tax minimisation), emotional (rewarding a child who has made significant financial or other contributions), lifestyle (wanting to retire, travel or have less responsibility and pressure), or to minimise your estate for fear of it being contested?
Or a combination of the above?
What to do
Consider your present assets and liabilities position
- Will you have enough once the gift has been made to live in the lifestyle to which you are accustomed?
- Consider all people that might logically be affected by your actions and/or may have a claim upon your death.
- Consider if adequate provision can be made for them (where you think necessary) in other ways to reduce the prospect of a claim being made against your estate.
- Think about the taxation and capital gains tax consequences of the gift and who is to pay for those.
- Think about where your future income and financial support will come from.
What are your likely needs and contingencies?
For example illness, aged care needs, nursing or other home entry fees and ongoing charges and fees.
Think about where you will live if you are gifting a property that includes your residence. Do you have security of living there (other than a verbal promise to be looked after)? Can it be secured by you?
Record the transaction in a deed to ensure clarity and to record the gift.
What not to do
- Rush into the decision and be in a hurry to have it finalised.
- Gift property without seeking proper legal, financial and accounting advice.
- Be pressured or emotionally blackmailed into making the gift.
- Underestimate the loss of standing that can occur within a family when making a significant gift that may divest you of control of an asset or business.
- Forget to address any debts or mortgages, and ensure you are released not only from any securities such as mortgagees and PPSR registrations but also from any guarantees you may have given, particularly if you have a company or trust arrangement.
Contact Shine Lawyers
Before you proceed with gifting the family business or property to your children or other family member please give our expert Wills and Estates team a call to discuss your options. Sound legal advice can help to limit any problems down the track that may arise.
Written by Tracey Ryan. Last modified: October 1, 2019.