Why you can bet the farm on trusts and wills
In our weekly series on matters of law, Walker Legal's Paula Morrow says that farmers should do more to protect their business assets, otherwise they risk placing their family's future in jeopardy.
Despite increasing financial difficulties across the sector, the agri-food industry remains one of the most prominent family business structures. According to the Ulster Farmers' Union, it turns over more than £4.5bn every year, making it the cornerstone of our economy.
With this in mind, why is there a failure to recognise the importance of protecting the business structure and the family members involved to future-proof hard-earned wealth and ensure financial security?
Solicitors are still tackling inheritance issues after someone dies, when the farmer develops mental incapacity as a result of dementia or brain injury, when the business partnership breaks down, and when a marriage breaks down and there is panic about how assets will be divided. These are real issues which can be discussed and planned for. The most difficult decision to make is where to begin.
Firstly, consider making an enduring power of attorney. This will ensure that in the event of incapacity, the business can continue uninterrupted.
It will also avoid the lengthy alternative of an application to the Office of Care and Protection for the next of kin to become a controller. The power of attorney is a simple four-page form which can be signed and stored safely until required.
Secondly, make a will. If you do not have one, the rules of intestacy apply, and your estate may be distributed in ways which would render it impossible to continue farming. A will can safeguard the farm and your family, and can contain the provisions to ensure it maximises the thresholds and exemptions for inheritance tax.
Thirdly, consider whether or not it is appropriate to make transfers of property and lands during your lifetime either outright or in shares as tenants in common. This may be appropriate for potential development sites on the farm which do not attract agricultural property relief.
This may also be relevant if consideration needs to be given to the potential of long-term care costs.
Fourthly, consider whether a trust instrument would be appropriate. A trust is a legal arrangement which allows an owner of assets to appoint trustees to look after those assets. A trust can be a simple, flexible arrangement tailored to your needs depending on what areas of family life or assets you wish to protect. Trusts are being used more and more often as part of the lifetime planning process, and they can be very effective.
Finally, consider making a partnership agreement or shareholders' agreement to set out what the contingency plan is to be in the event the unthinkable happens to protect the business, your business partners and your family. It is also recommended that your life insurance and critical illness cover is in place to fully protect your dependants.
Most importantly, discuss all options with family members and business partners, and ensure everyone is aware of the plan. This will go a long way to guarantee that any major life event will not be as traumatic as first envisaged.
- Paula Morrow is head of administration of estates and wills at Walker Legal. Next week, Clare Templeton will give advice on the legal aspects of chasing debt. Contact Walker Legal at 6 Bridge St, Portadown, BT62 1WL, tel: 028 3833 7591 and Scottish Provident Building, 7 Donegall Sq West, Belfast, Co Antrim, BT1 6JH, 02890 918461