Estate Planning
If you are the owner or involved in a farming business which is run by you and your family there are a number of very important things you should consider to control and protect the farming business from external threats. These will help you to plan for your future, especially in these uncertain times.
The external threats
There are 5 main external threats which could have an impact on the future of your business:-
Taxation
Insolvency
Divorce
Claims against the estate
Mental instability or emotional susceptibility of those involved in running the farming business or family members who own business assets.
Who needs protection and how can you do this?
Those working in the business and the wider family group should be protected. This includes people not working in the business but who own shares or business assets.
Different individuals will have different income and capital requirements; some may need more income and others may have good incomes but would like capital and/or voting (strategic) control so that they have a say in the running of the business?
You may wish to consider the fragmentation of the ownership of the business or the assets used by the business through lifetime gifts, if a company is involved you can split share capital into different classes and amend the Articles of Association. You could prepare a family charter, pre-nuptial agreements and Lasting Powers of Attorney.
Family Trusts
By using Trusts you can separate the control of the farming business from the economic value of the business. Trustees should act impartially, and if they are not beneficiaries of the Trust they will have no personal financial motive for making certain key decisions. A Trust could also provide centralised decision making and long term asset protection and control. Trusts can last 80+ years, and the original owner as Trustee can control the business without remaining an actual owner for a considerable period of time.
Wills
If you die without a Will then both your farming business interest and the assets you own that are used by the farming business may not pass to the persons who you would want to receive them. This may even jeopardise the continued running and success of the business.
And a Lasting Power of Attorney (LPA)?
It is extremely important that you consider making a Lasting Power of Attorney since, if you lose capacity and cannot make decisions yourself, the alternative to an LPA is complicated, slow and expensive. If you already have an LPA (or the old style Enduring Power of Attorney), you should review it to check that the persons you have appointed as your attorneys and the powers you have given them are appropriate to the current circumstances. Any EPA or LPA can be changed at any time, similar to a Will. In relation to the day to day running of your business the lack of authority to act on your behalf could be catastrophic if you are a central figure in the financial side of running your farming business.
Always plan ahead with assistance from your professional advisers to ensure that you have these potential situations under control with as few unpleasant surprises as possible.
To speak to one of our agricultural law specialists, simply select one of the staff profiles. Alternatively, you can make a general enquiry using the contact details at the bottom of this page.
Sharon Richardson
Jennifer Bartram
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