Farming Estate Planning – replacing promises with written agreements
Approximately 70 per cent of adults in Northern Ireland do not have a Will, with many trusting that the rules of intestacy will result in their assets eventually finding their way to the people they would have wished anyway.
However, when it comes to farming estates, there can be very serious repercussions of a failure to follow up on promises and verbal agreements with appropriate written legal documentation. Farming land is of critical importance to ensure the legacy of a farming family through future generations, but it is still alarmingly common for families to rely on verbal agreements to set out plans for inheritance and the devolution of the farming business.
There are a number of potential issues that farming families need to protect against, but the first step that should be taken to safe guard the legacy of the family business is for Wills to be written to form the starting point of a comprehensive farm inheritance and estate succession plan. This will also need to involve expert advice on Farm Inheritance tax issues to ensure that estates take advantage of the various exemptions and reliefs in respect of agricultural property and businesses.
Other legal provisions that should be considered are partnership agreements, deeds of trusts, and business tenancy agreements. Such agreements can include provisions for the division of property or even set out contingency plans in the event of a breakdown in relations.
A failure to structure the farming business on the basis of written agreements and an estate inheritance plan can expose the business to risk in the event of divorce and/or death. Farming land can enter the marital asset pot in the event of a divorce if the appropriate measures are not taken. This can result in the need to capital raise by selling a part of the farm or borrowing against the property. Some farming businesses will put a requirement for a pre-nuptial agreement into a partnership contract to protect the assets of the business.
Relying on promises of a future inheritance to plan the future of a family farm has often proved problematic. Relationships can become strained and in some cases fall apart altogether, and people have sought to go back on promises made over many years. Children working on a farm for low wages on the basis of an implied understanding of a future inheritance have a legal right to challenge a Will that does not honour express and sometimes implied promises that encouraged them to act to their detriment.
Farming businesses are often the making of generations of a family, with the hope of many more generations to be involved in the future. Protecting the business and its critical assets is therefore essential, and taking expert legal and tax advice is critical.
To take the first step contact one of our Wills and Estate planning experts at Wilson Nesbitt in Belfast or Bangor by clicking here.