Without it, families can find themselves in serious difficulty. After a nice Christmas meal, while everyone is relaxing and the Boxing Day test match is on television, take a quiet moment when heading out to check the irrigation or the animals. Use that time with your parents or partner to discuss this difficult but essential topic. These conversations may feel uncomfortable, but they are vital to securing the future of your farm and family.
Poor or absent estate planning often results in families losing their farms. Something I have unfortunately seen firsthand. Because of the unique way family farms are managed, specialised assistance is needed to ensure that your estate, or your parents' estate, is properly structured. This is the only way to guarantee that the farm is passed on to the next generation in a way that gives them the best possible start.
I have heard financial planners from major banks suggest that the "fairest" solution is to divide the farm equally among the children. No. Just no. A farm is not like a car or a house that can be sold quickly and the proceeds divided among heirs. Even if you decide that the farm should be sold after your death, leaving it tied up in estate settlement and unable to be farmed will drastically reduce its value. A farm is a business that must continue running, even during times of grief. If operations stop, the farm’s productivity and market value decline rapidly.
This is why it is critical to set up the farm as a business by registering it formally or placing it in a trust. These are two ways to ensure that the farm is not stuck in the deceased person's personal estate.
Estate administration typically takes up to nine months if there are no complications, and farms almost always face additional complexities. If the farm is not registered as a business, all cash flows and potential loans are frozen as they are seen as part of the deceased’s personal estate and not part of the farm business. This makes farming impossible until the estate is finalised, which can be fatal for the business.
Furthermore, if a person dies without a valid will, all assets will be divided by the court under intestate succession rules, leaving the family with little control over the outcome.
Several fees and taxes must be accounted for in estate planning:
- Executor's fee: Calculated as 3.5% of the total assets plus 15% VAT. Make sure to appoint an expert who knows how to handle estate matters. Do not nominate Uncle John the family friend to do it, as he will have to appoint a lawyer to do it. So, just get an expert right from the start.
- Capital gains tax (CGT): Determined as the difference between the current value and base value. Payable at an inclusion rate of 33.3% of the individual’s marginal tax rate (for example, 33.3% × 40% = 13.3%). Discounts apply, including R300 000 for general capital gains, R2 000 000 for a primary residence, and R1 800 000 for a small business. With the large increase in agricultural land values seen in regions such as the Western Cape, CGT liabilities can be far higher than expected. Accurate valuations and proactive planning are therefore essential.
- Estate duty (estate tax): Levied at 20% on the net estate after liabilities, costs, and taxes are deducted. A rebate of R3 500 000 applies. To help expedite this process, ensure that there is an up-to-date list of assets and liabilities. Best practice is to align this with annual financial statements and accounting records, so that valuations and liabilities are always current.
The costs of transferring an estate, including executor’s fees, capital gains tax, and estate duty, will directly affect the cash flow available to beneficiaries. Plans must be in place to protect the estate against these challenges. All outstanding amounts are required to be settled within twelve months. Due to the substantial value of land and agricultural assets, securing the requisite funds may present significant challenges.
To avoid forced sales or financial distress, ensure that there is sufficient life insurance and accessible capital available to heirs to cover these costs. SARS enforces strict timelines and rarely makes allowances for personal hardship. Liquidity planning is therefore essential.
See this as a starting guide – there are probably experts out there who will chastise me for the myriad of omissions in this article. Financial planners, attorneys, and tax specialists who understand both the legal framework and the unique circumstances of agricultural estates can design strategies that preserve the farm’s value and ensure smooth succession. This is not an area for generic solutions. Specialised knowledge of farming operations, tax law, and estate administration is indispensable.
By acting early and seeking expert guidance, you can protect your farm, secure its future, and give the next generation the best possible foundation. Estate planning should be seen not as a burden but as an investment in continuity and stability for your children and grandchildren.