Family law and the family farm

October 1, 2020

When it comes to a family law property settlement the family farm is not “…just another asset” to the people involved.

The first step in a family law property settlement is to identify the assets and liabilities of the parties.  This may sound like a straightforward process, but in matters involving a family farm, this can be a substantial and complex exercise.

While the Family Court does not treat a farm any differently to any other type of asset, it is important to engage an experienced solicitor who understands agribusiness issues and the nature of a farming business so the impact of how this critical asset is appreciated and understood.

What is “the farm”?

We start by asking our client lots of questions about “the farm” and what it is comprised of, such as:

• Is there one parcel or multiple parcels of land? How much of the land is farmed?
• What permanent fixtures (e.g. sheds, silos, houses) are on the land?
• Is there cropping? Are there currently crops in the ground or grain on hand?
• Are there water licences? What are the current water allocations? What sort of irrigation system is used?
• Are there livestock? Are the livestock just traded or is there a breeding program?
• What plant and equipment is there? Is it owned outright or leased?
• How is the business operation/s structured? Who is involved in the running of the business? Which family members live on the farm? Are there employees?  How are they paid for their services ?
• Do third parties use the land, e.g. is some of the land leased out or used for agistment?
• Are there other sorts of assets such as farm management deposits, SMSFs?

Who owns what?

There are often different types of entities (e.g. partnerships, discretionary trusts, companies) and various family interests (e.g. parents, grandparents, siblings, adult children) involved in the ownership of the farm and the running of the business.  It is imperative that these entities and interests are clearly identified and understood from the outset of a property settlement, as any proposed division of property is likely to have an impact on them.

In addition to obtaining information from our clients, we undertake the following steps to confirm exactly how the farm is owned and operated:

• Undertaking a variety of searches. Land title searches confirm the legal owners of the land (both current and historical) and any registered interests over the land such as mortgages, easements and registered leases.  ASIC and ABR searches show us details of companies and businesses.  PPSR searches show us whether there are any registered security interests over the stock or plant and equipment.
• Reviewing a range of documents such as financial statements, partnership agreements, trust deeds, company constitutions, tax returns and bank statements.
• Is there a succession plan, or an option to purchase by one of the family members whose interests need to be considered in the overall strategy.

What is it worth?

Once we have determined what the farm consists of, and how it is owned and operated, we need to establish what everything is worth.

A review of the financial statements and bank statements is generally sufficient to verify the values of bank accounts and liabilities such as bank loans, overdrafts, equipment loans and credit cards.

Determining the value of the various farming assets can be a substantial task and is not simply a matter of running through the balance sheet and accepting those values.  Sometimes the parties can agree on estimated values for some items, but it is often necessary to appoint various professionals to provide valuations such as licenced property valuers, accredited machinery valuers and stock agents.

At the conclusion of this process, we have clearly identified and ideally agreed with the parties, the “property pool” which is available for division between them.

What happens then?

This is when the real process of coming to an agreement on the property settlement between the parties to the relationship occurs.

The process can be lengthy when complicated property holdings, including the family farm, are involved.

We work hard to ensure the best possible result for our client in any property settlement, but when the family farm is involved we also understand how important it is to work towards a solution that will not see the ongoing value and successful operation of that farm diminished.

For advice on this bulletin or your own Family Law matters please contact a member of our Family Law team.