Succession Planning
It isn't easy to think about what will happen to your assets when you pass on. Our farming clients spend their lives building successful and resilient businesses that are essential to the future of British Agriculture. Yet research conducted by the Let's Talk Succession campaign shows that less than half of farm owners in the UK have a succession plan in place. Not only do succession plans help to protect the value of farming assets, but they also ensure that the farm is left in the capable hands of a suitable successor.
We consider five important steps to take in planning for succession:
Make a Will
In English Law, the starting point is that you can leave your estate to whoever you choose, although certain categories of people may be able to make a claim against your estate. Making a Will is the best way to ensure that you control who benefits from your estate after your death. It is often possible to build in asset protection and make things more tax efficient by the inclusion of trusts in the Will. Many clients are concerned that assets are protected for descendants, and you cannot do this properly without making a Will suitable for your circumstances.
If you do not make a Will, your estate will pass according to the rules of intestacy, which may result in an outcome you would not want. Those who are not provided for by the rules, despite often being those you wish to benefit are left with little alternative but to seek redress through the courts. This can be both expensive and time-consuming and increases the capacity for hostility between family members at an already difficult time.
Ensure That Will Is up to Date
It is not uncommon for a testator to change their mind about who to leave their estate to during their lifetime. As circumstances change, your Will should be reviewed and updated. This is particularly important where individuals get married, divorce, or buy property. Long term unmarried partners will not automatically inherit.
Record Every Promise in a Written Agreement
We are often approached by clients who, during the lifetime of the original farmer, agree to work on the farm for minimal reward on the basis that they inherit the farm upon the farmer's death. Whilst agreements such as these are common in farming families and businesses, difficulties arise where the agreement is not reflected in terms of the Will (or where there is no Will at all).
For example, let's say that Mr and Mrs Jones own a farm. They have three sons: John, Henry and Christopher. John and Henry choose to make their lives away from the farm, whilst Christopher agrees to stay and work for minimal pay and take over the farm one day. Upon Mr and Mrs Jones's death, the Will provides for the farm to be divided equally between John, Henry and Christopher. Christopher, therefore, brings a claim against his parents' estate for what he believes is his rightful share of the farm.
Whilst Christopher may be successful, the cost of bringing a claim based on evidence of a verbal agreement will be substantial and could significantly diminish the value of the farm. Alternatively, Mr and Mrs Jones may not have agreed to leave Christopher the farm and instead rewarded him with additional benefits during their lifetime. Without their evidence, John and Henry may struggle to defend Christopher's claim.
A written agreement is an effective way to convince the court that all parties knew where they stood when they made their decisions.
Consider Whether a Partnership (or Shareholder) Agreement Is Necessary
Taking our example of the alleged agreement between Mr and Mrs Jones and Christopher, Christopher could have protected his interests by entering into a written partnership (or shareholder) agreement with his parents. A partnership (or shareholder) agreement is a flexible agreement that can hold significant weight in evidencing each party's expectations. Succession clauses can be included.
Use the Knowledge and Expertise of Your Trusted Professional Advisors
Early estate planning can not only save tax but can also prevent disputes in the future. It is important that there is a clear succession plan for any business. Whilst Myerson Probate Dispute Team pride themselves on their ability to guide clients through extremely difficult circumstances and complex legal points; they are often faced with situations that could have been prevented by proper succession planning. Costly litigation risks hostility between family members, and court judgments can lead to farm assets being divided. Early consultation with a solicitor and other professionals is the best way to ensure your farming business is left in the right hands.
Here to Help
If you have any further questions or if you would like further information on how we can help, please contact a member of our Wills, Trusts & Probate Team by calling on 0161 941 4000 or email The Wills, Trusts & Probate Team.