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Farming Families and Succession Part 2
Following on from my previous article, if, as a farm business owner, your intention is to only pass on the farm after your lifetime, then you need to think carefully about how your Will is to be structured.
The first step is to ascertain the ownership structure itself, whether that is you acting as a sole trader, within a partnership or as a limited company. Different options will exist as to how those assets should be passed on. You also need to understand what is owned outside any business structure; it is very common for land to be held outside of a partnership.
Prior to making any decisions you will also need to consider the impact on the farm the event of your death, particularly if it is untimely. What do other people know or do, and have the risks being identified? Ultimately, who is going to continue farming?
In relation to the terms of the Will then you may wish to consider:
- Appointing special executors to deal exclusively with the farm business itself.
- Is farm land owned by the farm business or separately? Might it be appropriate for the land to be left in a different direction to the main business itself, to provide a balance between those family members involved with the farm and those that are not? This is less common than with other business types, particularly in view of the taxation issues that arise and the control often desired, but it is not impossible to separate ownership.
- Do you need to include extra administrative provisions to allow Executors to continue trading?
When thinking about who is going to inherit the farm and business you should consider whether you wish to make a gift to him or her outright, or whether a trust structure should be incorporated. The decision on this is likely to be determined by the level of control or protection in the first instance but can also provide great flexibility and the opportunity for individuals not involved within the business to still benefit in some way.
For example, if the farm includes land that has the potential to benefit from development opportunities in the future it may be that the child or children involved with the day to day farming can enjoy the benefits in the short term, as they are the ones working the farm, but any long term windfall can be shared between all of the beneficiaries, thus keeping the wider family interests as equal as possible.
Making decisions about who is going to inherit a farm can be emotional and difficult. However, the consequences of not making a decision can lead to even greater problems arising in the future, and it will always be preferable for your own wishes to be put in place, rather than those of anybody else.
For further advice on the subject of preparing Wills for business owners please contact Richard Horwood.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.