Farm & Young Farmer Discretionary Trusts

What is a Farm or a Young Farmer Discretionary Trust used for?

A Farm Discretionary Trust is used where a family wishes to acquire land for primary production and to pass that land to other family members. There is a stamp duty exemption available for the transfer of farming land:

  • from one or more individuals who are members of the family or a company whose shareholders are comprised of those persons to a Farm Discretionary Trust
  • from a Farm Discretionary Trust to one or more individuals who are members of the family

A Young Farmer Discretionary Trust includes provisions to take advantage of the above stamp duty exemption and to enable the young farmer to obtain a full stamp duty exemption on the purchase of his or her farm from an unrelated party up to a certain value. A Young Farmer is classed as a person under the age of 35 years.

What’s required?

There are three parties who must be identified when preparing the documentation for a farm and young farmer discretionary trust. All of these parties must be legal entities. A legal entity may be one or more individuals, a company or an incorporated association. The individuals must be over the age of 18 years, not bankrupt nor subject to any other legal or mental disability.

  • The settlor, whose role is to:
    • invite a person to act as the first trustee
    • settle some property on the trust
    • determine the terms of the trust deed.
  • The trustee, whose role is to:
    • hold the assets of the trust in its name
    • administer the trust, investing the trust funds and keeping its records
    • distribute trust income and capital to the beneficiaries.
  • The beneficiaries – beneficiaries don’t perform any function in a trust but must be clearly identified either by name or by relationship to at least one named individual. There are certain restrictions on the beneficiaries under these trusts in order to meet the exemption criteria.

An optional role is that of the appointor who, if the role is filled, has the power to remove and appoint the trustee and whose consent is a necessary pre-requisite to any changes to be made to the trust deed. As this is such a pivotal role, we recommend that the deed provides for a succession plan to cater for unforeseen circumstances.

The trust deed sets out the terms of the relationship between the trustee, the beneficiaries and, if the role is filled, the appointor. It can be used to dictate a variety of procedures or mechanisms in terms of the discharge of the trustee’s duty to the beneficiaries.

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