Succession Planning for Farming Families
A philosophy for farmers to live by
“Live as though you’ll die tomorrow, but farm as though you’ll live forever.”
A quote by Australian author, John Marsden, which rather encapsulates a philosophy which perhaps most farmers would want to adopt.
“Living as though you’ll die tomorrow”, meaning making the most of life, as well as ensuring plans are in place to secure the future of your farm and livelihood for your loved ones when you are no longer here. “Farm as though you’ll live forever”, presumably means making decisions for the long term good and future of the farm.
All admirable intentions, but how to put it into practice?
What is succession planning?
The process of succession planning involves the transfer of responsibilities and assets from one generation to the next. However, it’s not always as straightforward as one might imagine if the intended child or relative does not wish to take on the running of the farm, or with complexities such as relationship breakdown and divorce resulting in the splitting of treasured family assets. Difficulties can also arise if the land is not held as expected where assumptions are made about ownership, often resulting in misadministration of assets. A piece of land assumed to be owned jointly, that turns out to only be owned by one person can cause unwanted taxation consequences and problems in practical administration. Part of succession planning is confirming the current position, not just hoping that the farm affairs are as the family ‘have always known it to be’ Succession planning can occur during your lifetime, or upon death with a well drafted Will. As advisors, we would consider lifetime planning in the context of Will instructions to ensure that the two do not conflict.
Farmers often benefit from certain inheritance tax reliefs, including Agricultural Property Relief and/ or Business Relief which need considering carefully.
Why do I need to think about succession planning?
Passing on ownership of a farm business can be stressful, at the best of times, and many farmers try to avoid the subject altogether, until it is forced upon them. However, it can be particularly difficult in this scenario e.g. when the transfer is unplanned through illness, or the sudden death of the owner. Far better to have the time and legal support to consider the options available to you so that you can avoid stress and heartache in the future. It can also ensure operations are not halted suddenly by those actually working finding themselves not empowered!
What does succession planning involve?
Initially, it would mean identifying the assets of the farm and defining the roles of family members who wish to be part of the future of the farm, as well as making provision for those not wanting to be involved in the day to day running of the farm. This could involve drawing up partnership agreements, or setting up a trust to enable your children to run the farm together, or specify them as beneficiaries adjusted to proportionally reflect their individual input into the farm. There is obviously business continuity to be considered within the succession planning process, as well as tax planning to minimise inheritance tax where possible.
Business continuity, Wills & LPAs
Succession planning would incorporate working out what would happen if you were temporarily incapacitated as well as what would happen when you die. A Will deals with what happens when you die, whereas appointing a Power of Attorney deals with what happens when you are alive but incapacitated and would ensure that the farm business continues should you fall ill or have an accident. Business LPAs are a separate document to a standard LPA, further detail on this can be found here
Providing a secure future
Defining the above with the supporting legal documents in place means that you can concentrate on what you do best knowing that you have secured the future of your family and their livelihood. Leaving these crucial decisions to chance upon death or sudden illness can leave the farm in turmoil.
What does succession planning cost?
The cost of succession planning would depend on what would be required for your particular circumstances and which legal documents would be appropriate. Our rates can be found on our pricing page and we will provide estimates of the anticipated scope of work provided at the outset. Where possible, fixed estimates are provided for preparing legal documents or undertaking defined tasks.
Get in touch
If you’d like to find out more about succession planning in relation to a farm, our friendly and experienced team would be pleased to hear from you. You can reach us by emailing info@penderlaw.co.uk or by calling 01872 241408.
Get in touch
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