Agricultural Business Succession Planning
Handing over a business can be fraught with hard-to-grasp legal intricacies and tax implications.
So it is perhaps unsurprising that many prefer to stick their heads in the sand rather than attempt to get to grips with the basics of succession planning.
But the consequences of this can be catastrophic both from a business and personal perspective.
Although less than half of farmers interviewed by Farmers Weekly had created a succession plan, nearly 80% did have wills in place.
This indicates that most want to pass on the business and assets to the right person, but have not necessarily tied those wishes into their succession and tax planning.
It is essential that your succession plan, wills, pensions and investments work together to achieve the required outcome, and that your family are involved in that decision-making process from the outset.
The consequences of getting it wrong
Deciding who will own the farm and who is the best person to manage it are two very different issues – it isn’t always the same person.
A sharp increase in family farm litigation in recent years highlights the importance of inclusive and watertight succession planning.
Formal partnership agreements and contracts are very useful, but rare – only 40% of respondents to the Farmers Weekly survey had a partnership agreement in place.
Common arrangements include youngsters working on the farm for minimal pay, on the understanding they will inherit the farm, which may not happen due to a conflicting will or the lack of a will.
Do something now, like allocating shares in the company or partnership – don’t wait until someone dies, as the result is often acrimonious and disastrously expensive.
Creating the right business structure around different farm enterprises or diversifications can make succession and tax planning simpler. You need to look at the viability of a business after death; don’t leave problems for your children to inherit.
Under intestacy rules, the spouse typically receives a large proportion of the estate, with the balance split between offspring – potentially creating considerable tax liabilities and uncertainty.
Even a will isn’t set in stone – it must be revisited regularly as it will be voided upon marriage and divorce, and can be contested after death if it doesn’t reflect your wishes or those of the family.
The worst litigation of all is between family members, so be open, transparent and proactive or you could dissipate the entire value of the estate in legal costs alone.
For estate planning in Bexhill, Hastings, Rye, Battle and anywhere else in East Sussex and Kent please book your Free consultation.
Source: Farmers Weekly
This message was added on Tuesday 18th August 2015
