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Farm succession: The importance of putting the right agreements and plans in place

With an ageing workforce, emerging technologies and an industry which is difficult for new entrants to contend with, agricultural business owners need to be thinking about what the future farm looks like.

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The importance of putting the right agreements, plans and people in place

As well as this, they need to ensure they are building resilient businesses and workforces, and putting the right agreements, plans and people in place.

 

Derek Walsh from the agriculture and rural business sector at Coffin Mew said succession planning was not just about preparing for retirement, but rather about long-term business planning.

 

Some of the court cases over the last few years include:

  • Guest v Guest: a claim by the son based on the fact he had relied upon his father’s assurances that he would inherit the farm he had worked on for more than 30 years for a modest financial reward;
  • Ham v Ham: a dispute over the value to be paid to an existing member of the family farming partnership;
  • Sargeant: a widow seeking to bring a claim under the Inheritance (Provision for Family & Dependents) Act 1975 some 10 years after the date of the grant of probate to her late husband’s estate.

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“The common themes in these cases are a breakdown in communication between older and younger generations as to how the farm will evolve and who will inherit the farm; the absence of a properly thought through will; or a wholly inadequate partnership deed,” said Mr Walsh.

 

“They all highlight the importance of looking ahead to create clear, well laid-out plans to avoid future disputes.”

 

He said there must be a carefully thought-through will in place to address the delicate balance struck between the next generation of farmers and the needs of other non-farming children.

 

Successor

Lasting powers of attorney for both finances and health and welfare also ensures a person of choice will continue to manage any farming affairs and keep the farm going for the intended successor.

 

A properly drafted partnership deed is also recommended.

Mr Walsh added: “Not only can they be used to bring the next generation into the farm as a partner, but can provide the ability for the next farming generation to acquire the farm and for the resultant cash proceeds to be allocated to non-farming members of the family.

 

“The partnership deed can provide for a proper valuation process and set out the time scale within which monies are to be distributed.

 

“It is also important for the partnership deed to be looked at in the context of the will so there is no conflict of purpose between the two.”

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