Planting the seeds now for the future
Succession planning for a farmer is difficult – even at the best of times – but by having open discussions now with your family you will be able to clarify intentions and plan for who will own and deal with the farm once you retire or die. These discussions will enable you to put in place key documents so that you are able to protect the farming business in the future.
Inheritance tax planning and will planning
It is important for a farmer to have a will so that the assets pass to the right beneficiaries in the most tax efficient way. My last article discussed the intricacies of inheritance tax planning for a farmer and the potential of claiming agricultural property relief and business property relief when you die. Inheritance tax planning and having a will are integral to a farmer’s succession planning. By not having a valid will in place, you could cause lasting damage to the farm and to your family.
Other key documents for effective planning
Further key steps for future proofing the farming business – including partnership agreements and lasting powers of attorney (LPA) – must be considered in line with how your farming business is structured to ensure that the business continues effectively if certain circumstances arise.
If you are farming in partnership with someone else, you should ensure that you have a written partnership agreement in place. Many spouses or family run farms operate within a partnership structure but do not have a partnership agreement. If you do not have a partnership agreement and one of the partners dies, this can have a detrimental effect on the farming business. The law dictates what happens to that partnership and it can cause issues, for example, with accessing bank accounts which, in turn, causes problems for the business, your family and the surviving business partner. By having a carefully drafted partnership agreement and by regularly reviewing it once it is in place, you will be acting both in the best interests of your family and in the farming business’s sustainability.
A LPA for property and financial affairs allows you to appoint people (your “attorneys”) that you know and trust to make decisions and act on your behalf if you need them to, for example, if you have an accident out on the field and need a period of rest to recuperate either in hospital or at home. You may need assistance with operating bank accounts so that suppliers and employees are paid. Alternatively, you may end up losing capacity to deal with your property and financial affairs and need your attorneys to step in permanently. You must make a LPA whilst you have the requisite capacity to do so. By having an LPA for property and financial affairs, you are ensuring the survival of the farm beyond a lack of capacity. Whilst there is the option of someone stepping in and applying to the Court of Protection to be appointed as your deputy so that he or she can have access to the farm assets on your behalf and make decisions in your best interests, this is a costly and time-consuming exercise. Time can be of the essence.
Planning and reviewing
It cannot be emphasised enough the importance of not delaying discussions and putting effective succession plans in place before it is too late. Even if you have put some plans in place, it is equally important to review them to see if they need changing in light of any current wishes you have, or changes made to the farming business since putting them in place.
Paul Collingwood is a senior associate in the specialist Wills, Trusts & Estates team at Sintons. To speak to Paul about this or any other matter, contact him on email@example.com or 0191 226 3713.