Farm Succession Plans

Land Agent’s, Lawyers and Accountants are often guilty of highlighting the importance of succession planning by simply regaling horror stories of what can happen if it all goes wrong.

It makes much more sense to outline the starting points for a successful succession plan and the documents that are required, along with the key areas that need to be considered. 

You need to ask, what do you want to happen when you are no longer in control of your business?

First and foremost you should decide what you want to do with your assets; 
i) in your retirement, and
ii) after your death. 

It is important to develop a plan that meets the expectations of all those concerned.

The specifics may be subject to changes in terms of timing and strategy for tax planning purposes or to suit cashflow but getting your key objectives written down is a good starting point.

This is the only way that your succession plan will be carried out and your objectives must be clearly documented.

Before you can start tax planning you need an inventory of your assets including an estimated value of each and the current use.

At this stage it is also useful to make a note of the land you may occupy on verbal agreements, gather together any tenancy documents and record the location of the deeds of the farm or a note of the title numbers (if the farm is registered).

This is important whether you are a landlord or a tenant. You should also include cash in the bank or deduct mortgages/the overdraft when considering the total ‘pot’ of assets.

Life is not fair and after your death it is unlikely that everyone will consider your Will is ‘fair’. but you should do what you think is best for the next generation, fair or not. Take into account any family member who has been working within the business with the idea that they may one day inherit, as well as others that are not involved.

Your wishes need to be made clear in the plan so you should use your inventory to match the heir to the asset.

You should always seek professional advice. This is where we can come in. We can talk generally about your succession plan and run through initial ideas. 

All your plans need to be legally recorded. A will is the first of these documents identifying your intentions and appointing your executors. Appointing a Lasting Power of Attorney is also a good idea as this ensures that your plans can be carried out if you lose the capacity to do it yourself.

Partnership agreements are useful in the tax planning process and confirm which of the assets are partnership assets and will benefit from the appropriate reliefs.

You should talk to your family about your plans so they know what to expect. It is polite to also inform your executors of their appointments. Although they won’t have to actively take charge until you die they will have to be prepared if and when they are called upon.

You can’t start succession planning too soon and its best to discuss the matter sooner rather than later so nobody faces a nasty surprise when the will is read and then a lengthy legal battle ensues due to a miscommunication and the legal argument will leave everyone out of pocket and often splits families asunder. 

Once the plan is drafted it should be reviewed regularly, particularly where there is a change in family circumstances, valuation change or changes to tenancies or land occupation.

Contact us now for friendly help and advice by emailing:  jbrown@nechambers.co.uk 

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