Helen Gowin, Estate Administration & Probate Partner, looks at succession planning for farmers and gives her top tips for getting things right.
A good starting place is to consider the historical structure of the farm, and review who currently manages the finances and how roles are defined. Considering and documenting these aspects will help to outline the ownership structures. It is not uncommon for land and property to be jointly owned by family members. This can lead to future complications when there are changes in circumstances such as a death or divorce. Land could end up in the hands of one family member and not another.
Having a schedule of the assets and reviewing the ownership, will facilitate discussions on what each member of the business wants and how the older generation of the farm can plan for retirement. Thus enabling a smoother succession of the business to the next generation. This is important if some members of the family are more involved in the business than others and if farm land has development potential. It is better to plan how the business is to be passed on and discuss this openly with the whole family to avoid disappointments and tensions.
It’s therefore crucial to take advice if there are plans to restructure, gift or sell land as these may have tax consequences. If you gift assets you may need to survive seven years before they no longer attract inheritance tax and you should review whether agricultural property relief would still be available. This is a valuable relief to save inheritance tax so you should get advice before giving property away.
You should also make sure you have a Will to ensure the beneficiaries you do want to benefit do so, and in the proportions you would like them to. Trusts can help to give some flexibility on the division of assets. These should be reviewed regularly, especially if there are changes in the family and in the nature and structure of the business.
Finally, remember to keep records – documenting transactions and the assets held within the farming business, will save your family and executors time and money.
For more advice on succession planning for farmers, please contact Helen Gowin on 01260 282351.