The importance of succession planning

The importance of farm succession planning is a popular topic for us lawyers. While much can hopefully be completed during our lives, a Will is an essential part of succession planning.

One of our key messages to farming clients is to ensure that their Wills are up to date and that they actually achieve the intended objective. An essential part of this process, and often the hardest, is the involvement, and buy-in, of the other family members.

Every so often, along comes a case that really rams this message home. Such a case is currently going on in Wales, which serves as a salutary message to all. It involves a 320ha dairy farm currently owned by Mr & Mrs Davies, which is valued at £3.8m. They have three daughters, two of which have made their lives away from the farm, while daughter Eirian lives and worked on the farm.

For 30 years, Eirian had worked on the farm for minimal reward. Until she was 21, she received no pay at all. Such was her commitment to the dairy herd that she was dubbed the “Cowshed Cinderella”. She was prepared to do this as her parents had promised to leave her the majority of the farm on their deaths.

Recently, they had a change of heart and drew up a new Will leaving the farm in Trust with all three daughters as joint beneficiaries. Perhaps not surprisingly, the relationship deteriorated to the point that her parents attempted to evict Eirian from her house. In turn, she sued her parents for what she felt was her rightful share of the farm.

The case was heard earlier this year. It was ruled in favour of Eirian. The Judge allowed her to stay in her house and ordered her parents to pay her £1.3m.

The parties are due back in court this month (March) when it is thought that Mr & Mrs Davies will seek leave to Appeal and Eirian Davies will seek costs. It is thought that total costs may already exceed £1m.

It is hard to see any positives in this situation. As it stands, Eirian may have won the case but she will almost certainly lose the farm, to which she had devoted much of her life. Her sisters can’t be too overjoyed as their potential inheritance diminishes before their eyes, and her parents certainly wont be able to live out the rest of their days safe in the knowledge that they have secured their legacy. The emotional cost of such a case hardly bears thinking about.

It may be an extreme example, but it does serve as a timely reminder of the need for effective succession planning. Here are six simple steps to help you along the succession planning route:

  • Make an early start – better done while you are still fit and well;
  • Use the knowledge and experience of your professional advisers – Land Agent, Lawyer, Accountant, Financial Adviser, Pension Adviser etc. You may go through the process once, they have probably done it dozens of times;
  • Be clear in your own mind what you want to achieve, including how you want to see out your days;
  • Involve all the relevant family members at an early stage;
  • List the ownership and value of all the assets and liabilities. With a continually evolving land-based business, this may not be as simple as it sounds; &
  • Review all relevant documents to ensure that they are up to date and fit for purpose.

It may seem like a daunting process that will involve some awkward conversations, but rather better to grasp the nettle than end up like the Davies family or end up leaving a large legacy to HMRC rather than your successors.

Once the plan is in place, it is essential to review it on a regular basis. While this may sound like me fishing for some regular income, the situation can change quite quickly. Government can change the tax and pension rules overnight, people die, children are born and case law can change.

Sintons, in association with Brewin Dolphin and Rural Solutions, will be discussing these issues at a Breakfast Seminar on the 7th May at Capheaton, near Belsay, in Northumberland. Do contact me if you would like to attend.

If you would like any further information or to discuss any rural related matter, please contact Tom Wills, head of the agriculture & estates department at Sintons.

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