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Estate planning for farmers

Having a succession plan in place is a challenge for any business, but even more so for farmers.  On the death of the farming parent, it is usual for farms stay in the family, but it can be difficult to divide the assets evenly, leaving some feeling disinherited and others forever tied to the farm.

It can be difficult trying to attract new entrants to the industry and retain them. Young people from the farming community will often want to leave the region to attend college or university and gain new experiences. Having a farming succession plan in place will help by at least giving them an incentive to return to the family home.

Secondly, because farming returns have been low over the past 15-20 years, many farmers haven’t always put enough money aside for retirement, so there there is a continuing need for income to be taken from the farm. This can be achieved with a partnership where the assets are transferred, but with the older generation retaining a “limited” interest.  Alternatively, the land can be retained and a Farm Business Tenancy granted to the partnership, with the rent providing the retirement income. Both methods do not affect valuable Inheritance Tax reliefs.

Finally, a farmer may not be willing to pass on their farm, possibly due to a relationship breakdown or lack of confidence in the children’s ability to run the farm profitably. In this instance, passing assets into trusts or a limited company may be a solution. There can be nothing worse than watching the forced sale of the family inheritance which has been handed down for generations.

It is essential as a farmer to have a succession plan in place – and, if you plan to pass the farm onto your children, to keep them informed.

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