Many farmers put off preparing a Will and planning for the future but having a clear and structured Will in place is essential in safeguarding and planning for the future of the farm and family.
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Farms and families
Making a Will is especially important for farmers due to the fact there are often several generations of family contributing to the running of the farm, and there will be cases where some family members want to farm and some which do not. It is therefore important to consider how equality can be achieved where there are varying levels of family involvement in the farm. This requires careful consideration and planning to ensure the needs of both the farm and your beneficiaries are met.
Wills and powers of attorney
The preparation of a Will can also help mitigate the farms exposure to inheritance tax by taking into account reliefs such as Agricultural Property Relief (APT) and Business Property Relief (BPR). APR can enable you to pass on some or all of a working farm tax free. BPR can also be applied where assets are held as business or partnership property. It is however important to note that strict criteria must be met in order to qualify for these reliefs, and as such it is vital that you take legal advice to determine whether your assets will qualify and to what extent. Advice could also cover how your estate could be structured to obtain such reliefs in order to protect your farm for future generations.
If you were to die intestate (without a Will) then you have no say over what happens to your estate. In these circumstances the rules of intestacy would apply, meaning your farm could potentially be divided between a number of close relatives – and not those you would have chosen yourself. It goes without saying that this could create major disputes within the family, threaten the farm business as a whole, and incur costs to the estate and your beneficiaries which may have otherwise been avoided had a Will have been prepared.
Equally, it is also important to consider how your farm would be managed if you were to lose capacity. Farmers work with hazardous materials, dangerous machinery and unpredictable livestock on a daily basis and it is therefore crucial to ensure that the day to day running of your farm could continue if you were to lose capacity.
Many people incorrectly assume that their spouse, family member, or business associate could manage their affairs if they became incapacitated, however nobody has an automatic right to manage another person’s affairs. There is also a common misconception that making a Lasting Power of Attorney (LPA) is giving away control whereas the opposite is in fact true. By arranging your affairs in advance, you can detail who you would want to assist you, how they can assist you, and in what circumstances. This type of planning is especially important for farmers, who due to the nature of farming, never usually formally retire but continue to be involved in the day to day management of the farm. As such, mental capacity could be come an issue due to frailty of old age.
How planning, wills and LPA can help ensure the long term success of a farming family
A Property and Financial Affairs LPA can be vital in allowing farming operations to continue if you become unable to take an active role in running the farm be it through accident, old age or mental illness. If you become incapacitated there can be a profound impact on the ability of the rest of the family to run and manage the farm on your behalf. This could lead to significant disruption to the day to day running of the farm and incur extra costs.
An LPA allows you to select up to four attorneys to legally manage the business and finances of the farm. The individuals chosen will need to have the requisite skills and experience needed to take over the affairs from you, and they must be individuals you trust implicitly. Family members, friends or professionals can be appointed as attorneys. Attorneys can be appointed in a number of ways which can provide for a good degree of flexibility. Legal advice should be taken on this to determine what sort of appointment you require.
Farmers are typically advised to prepare two financial LPA’s – one to cover the farming business, and one to manage their own personal finances. The choice of attorneys can be different on each document, allowing you to select the individuals best suited to the roles to act. For example, you may farm alongside your children and think it would be most practical to appoint them on your farming business LPA due to the fact they would have substantial knowledge and understanding of the finances and day to day running of the farm. On the other hand, you may wish to have your spouse, or a child not involved in the running of the farm appointed as the attorney to deal with your personal finances.
If you do not prepare an LPA, and you are deemed to be incapable of making your own decisions, a court application would need to be made to appoint a deputy on your behalf. The deputy appointed may not be the individual (or individuals) you would have appointed yourself, and the application process can be expensive, time consuming, inflexible and often is limited. The delays caused by making this type of application could have a significant impact on the daily operations and cash-flow of the farm, not to mention your own personal finances.
How can Goughs help?
At Goughs we encourage all farming families to carefully consider how their estates and farms will be treated in the event of their incapacity or death. It is imperative that farming families take specialist legal and tax advice in relation to their farms and land. If you would like to contact a member of the farming team you can by filling in the form at the bottom of this page.
