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The importance of succession planning for rural businesses
Never has the phrase ”the only things that are certain in life are death and taxes” been more relevant, particularly for farming businesses. Farmers are experienced in coping with uncertainty, but many farmers are looking at what they can do to protect their business for the next generation.
Planning ahead may lessen the likelihood of unforeseen issues which could impact on the next generation’s future. Farmers planning to pass their business to their family should consider the following:
- A Will review for all involved in the business including future business members.
- A review of other legal documents including Partnership Agreements, leases and title deeds
- An Inheritance tax review.
- The implications of Legal Rights
A comprehensive will review.
Before any transfers are made a comprehensive will review should be conducted for all of those involved or to be involved in the business. It is important that all family members consider the worst case scenario when planning for the future however difficult this may be.
Wills and other legal documents.
Any such review should take into account other legal documentation, e.g. Partnership agreement, leases, company books and title deeds. Frequently it is not understood that these documents can take priority over a Will and can dictate how assets are transferred on death. At best, where these documents conflict it causes confusion; at worst it can result in farms being sold to settle arguments.
Inheritance Tax – IHT review.
It is a common misconception that farmers need not worry about inheritance tax. However, this can and should be planned for given that agricultural businesses often need to diversify to survive, taking them out of the protection of the reliefs available. Advance planning can mitigate against this risk and often small changes can provide a potentially valuable result.
Family Legal Rights
The impact of Legal Rights both of children and spouses also need to be considered. These rights arise automatically, regardless of the terms of a Will, and exist even where one parent survives. A quirk of the law means that even though they usually only comprise a share of the moveable estate, the value of these rights can be extended in some cases to include the value of the farm itself.
Bespoke advice
Advice must be tailored to the particular circumstances of each individual business and whilst we can’t predict the future, we can advise on any known implications for the existing business structure. It may be that all that is required is a conversation with us to ensure a smooth transition and peace of mind for all. If further action is required, we can provide a comprehensive approach towards achieving your goals.
For more information about how our land and rural business team can assist your rural business visit https://www.raeburns.co.uk/services/commercial-law/land-rural-business/
Jennifer Burnett Jennifer.burnett@raeburns.co.uk, tel 01358 720777.
