Wills and Succession Planning for Farmers

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Why are wills so important?

There is no time like the present to plan for the future and make your will. A will is one of the most important documents that you will have to make decisions on in your life.

The author of the will decides what is to happen to their property after their death and it is the only way to show that a formal and officially recognisable note of your wishes has been made.

If you do not make a will, the law dictates that your property is distributed amongst your closest relatives in accordance with rules set out in legislation. This may not suit every family situation and takes control away from the deceased person as to who is to inherit from them – for example if an unmarried person with no children dies without making a will the first in line here would be their parents. Depending on the relationships within the family this may not be who that person would wish to inherit.

Many people also like to make gifts of money or of particular items such as furniture, clothing, or personal belongings to friends or relatives. These can be included in your will, no matter how big or small. You can also, by making a will, have control over who is to carry out your wishes by appointing Executors in it.

For parents of children under 18 or children with a disability who may be unable to manage their own affairs it is very important as they can, in their will, appoint guardians of their own choice for their children, to make sure that each child is properly provided for depending on their circumstances and finally to ensure that they have the right people in place to manage any assets over a number of years for the children if both parents pass away.

It also makes it much easier for friends and family if their loved ones leave a will outlining exactly what their wishes are and it is cheaper in the long run.

Anything else relevant to this issue?

1. Many people may not be aware but there are legal formalities that have to be adhered to so as to make sure that your will is valid and cannot be subject to challenge, these include being drafted and signed in a particular format and as to who can witness and how etc. It is always advisable to get legal advice from a qualified solicitor so as to avoid a situation where your will would be declared invalid for non-compliance with these rules.
2. Somebody who has a will can update their will as many times as they like during their lifetime, but care should be taken to destroy any former wills in accordance with the formalities required by law. This is to prevent the possibility of any challenge to your most recent will. Your solicitor will be able to advise you on this.
3. Just because you leave a certain asset in your will to somebody this does not restrict your ability to dispose of it during your lifetime – a will takes effect from the date of death so if an asset mentioned in it is no longer within the ownership of the deceased person when they pass that gift will simply not apply.
4. It is important to notify somebody close to you of where your will is held so that it can be accessed when you should pass. There is no central wills register in the country so for the will to take effect its existence must be known. This does not mean that the details of what are in the will should be disclosed however.
5. People with assets in foreign countries need to make a separate will in that country dealing with those assets as well as having a will here in Ireland for any property in this country. An Irish will is not valid for assets held abroad. It is very important to tell both your foreign lawyer and solicitor here about your will abroad so that the wills in both countries can then refer to the fact that another valid will for you exists and that neither will, taken by itself, can deal with all of your assets- they need to be read together.
6. If the author of a will is married and excludes their spouse from the will the spouse is still entitled to a ‘legal right share’. That means that a spouse cannot be dis-inherited.A spouse who has been excluded from a will is entitled to half the estate if there are no children. This share takes priority over all other provisions. A spouse who has been excluded from a will is entitled to one-third of the estate if there are children. This share takes priority over all other provisions.Children however, who have been excluded from a will do not have the same entitlements – children have no automatic right to inherit from their parents but can make an application to challenge a will on the basis that a parent failed in their moral obligation to them, depending on the circumstances involved.
7. If property is owned jointly with somebody (e.g a husband and wife) then depending on how the legal paperwork is structured this may fall outside of any property to be included in that person’s estate and may automatically go to the co-owner. It may not be possible then to include this property in the will at all and advice should be sought from your solicitor if you are uncertain as to whether this applies to you.

8. Single Farm payments attach to a farmer, not to their land. If a farmer then wishes to have the single farm payments go to a family member who is to inherit the farm, this needs to be stated separately in their will. Otherwise, the single farm payment could end up in the remainder of the will assets, and could pass to someone who has no involvement with the farm whatsoever.

 

In Budget 2015, tax incentives were introduced to encourage land transfer and more productive use of agricultural land. Were these significant?

The changes in Budget 2015 have been generally welcomed by the farming community in a move that is said to encourage long term farming. The government’s aims through the measures available are to try to maximise land use and efficiency while making it easier for farms to be transferred or gifted so as to assist the younger generation of farmers coming through the ranks.

In summary some of the available tax measures are

1. A Stamp Duty exemption for leases of agricultural land to active farmers lasting between five and 35 years;
2. Allowing reduced Stamp Duty of 1% (instead of 2%) on transfers of non-residential property to certain   relatives (who are active farmers) until the end of2017;
3. Capital Acquisitions Tax Relief continuing for agricultural property gifted to or inherited by active farmers or those who are not active farmers but lease the land to active farmers on a long term basis;
4. Capital Gains Tax retirement relief expansion so that the relief would still apply if land is leased out for up to 25 years prior to disposing it (previously up to 15 years was allowed);
5. Allowing Capital Gains Tax farm restructuring relief to the end of 2016 and broadening it to allow for restructuring through whole farm replacement;
6. Extending Capital Gains Tax retirement relief to land let under conacre which is disposed of or, converted to long term lease before the end of 2016;
7.  Income tax exemption threshold increasing by 50 % for those leasing out farmland and also allowing relief to companies and those who are under 40 years of age;

Will the changes encourage land transfer do you think? Why?

The incentives that are available should encourage the transfer of lands, certainly to active farmers given the reliefs available. The fact that Stamp Duty Relief is also available on transfers of land to Young Trained Farmers who fulfll certain criteria until the end of2015 will also mean that young farmers in particular would seem to benefit from the current regimes.

How will these changes impact on the way wills will be made? Or will they have an impact?

This will depend on the particular circumstances of those involved. Taxes payable on inherited assets will be subject to whatever regime is in place when the person passes and so the situation then may be different now. it is therefore a decision based on many factors such as finances, lifestyle, family relationships, age, health issues and the farm itself amongst others as to whether transfers should take place now, while still alive, or by inheritance through your will.

If a landowner/ farmer wants to transfer land to a relative, what should they do? would you advise?

Transferring the family farm or farm land is big decision and it is critical that somebody who wishes to transfer would speak to their solicitor at the earliest stage to discuss the various ways that this can be done and to highlight any potential issues that may occur in doing so. There is no “one size fits all” way to transfer and each option needs to be considered, along with their various pros and cons. The main objective is to ensure that the person transferring is happy in the way that the farm has been secured for the future and to ensure that if the lands transferred are their sole source of income that they are protected with an income source. Ownership of the land can also be relevant in terms of providing for nursing home fees for example into the future so there can be a lot of areas that the landowner may be unaware of that their solicitor will guide them through.

Some of the various options outside of a straight transfer of all assets can include:

1. A transfer to joint names;
2. A lease agreement;
3. A transfer of the lands with the transferor maintaining an interest in the farm by way of a business partnership;
4. Transferring of a farmhouse but reserving a right of residence for the transferor;
5. Transfer of certain lands and assets but not all;
6. Transfer of certain lands and assets during lifetime and others on death.

Do the changes make it easier for farmers/landowners to do more with their land?

Yes – the changes from a tax point of view are helpful in providing reliefs and the financial consequences of selling, transferring, leasing or otherwise are usually one of the main decision making factors. There are however other factors that will need to be addressed before finding the right option open to you and a full analysis should be done together with your solicitor before making a final decision. In certain cases also consent of other parties such as co-owners or lenders may be required before any decision can be made.

What benefits can they expect if they long-term lease?

The benefit of leasing as opposed to transfer is that you would retain ownership of the lands and the tax measures in Budget 2015 do make the leasing option more financially attractive than previously from both a Lessor’s point of view with Income tax and the Lessee’s point of view in Stamp Duty. It has been thought in some quarters however that more should be done to encourage leases within families and to provide additional reliefs to encourage this. In practical terms leasing will not suit every farmer.