With farming inheritance disputes seemingly on the increase, Ashfords’ Tom Biddick looks at how to reduce the likelihood of your faming business being subject to a family dispute
It seems that not a month goes by without the national press reporting on another family resorting to the Courts to resolve farming inheritance disputes.
Discussions with regard to death, inheritance and the succession of the farming business from one generation to the next are not easy, and often any excuse will be found to put it off until ’tomorrow’.
We have also witnessed a huge increase in land prices over the last 20 years such that the value of the farmhouse, land and buildings can easily run into the millions of pounds, making it increasingly difficult to strike a balance when parents are providing for farming children and non-farming children.
However, if the subject of succession and inheritance is addressed by the whole family as part of a coordinated plan then disputes are far from inevitable.
The requirements for each family will be different. The important thing is that each family addresses the discussion with regard to their succession and inheritance plan in a transparent fashion, in good time and with the appropriate professional support.
By doing this you reduce the risk of an expensive family dispute and increase the likelihood of the business succeeding in the longer term as well as maintaining harmonious family relations.
Many family farming businesses will consist of members of multiple generations working together. It is not uncommon for grandparents, parents and adult children all to be working in the business and living in multiple dwellings on the farm.
There may also be non-farming adult children who the parents will still want to make provision for.
It is important that the older generations encourage dialogue and discussion between all generations. This will reduce the risk of a costly dispute at a later date and will often result in the business being given renewed impetus when the ideas of the younger generation are listened to and implemented.
All discussions with regard to the transition of the farming business from one generation to the next, whilst making financial provision for non-farming children, will be complex.
There will be accounting, legal, taxation, financial and property/business valuation issues involved. It is therefore important that your Accountant, Lawyer, Bank Manager and Land Agent are all involved from the outset.
Farm Consultants can also act as a go-between as a mediator to bring the parties closer together.
The costs of engaging with professional advisors will be significantly less than the cost of a full blown family dispute.
It is essential that all successions plans are properly recorded in robust and professionally prepared documentation.
All farming businesses operating as a partnership or limited company should have a partnership agreement or shareholders agreement in place which records the responsibilities, rights and capital ownership of all parties.
Steps should also be taken to establish exactly who owns what in terms of land and business assets, and consideration given as to whether the farm should be held on the balance sheet of the business or personally by the partners/shareholders.
Land ownership should be reviewed and properly documented, and if there are various beneficial owners of properties a declaration of trust can ensure clarity as to ownership.
It is important to give full consideration to the competing interests of all family members.
An out of date Will simply leaving the whole estate to the surviving spouse and then on the second death ’equally between my children’ could result in the break-up of the farm.
This could be avoided with a properly thought out Will.
It also allows an opportunity to provide for beneficiaries who are not involved in the business by leaving them the non-business assets/property or life policies could be taken out to provide funds for non-farming children.
Attention should also be paid to your Inheritance Tax (IHT) position and fully utilising the IHT reliefs of Agricultural Property Relief (APR) and Business Property Relief (BPR).