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Skipping a generation for a landowning farmer
As a landowning farmer, what should you do if your adult children do not want to farm but you want to keep the opportunity open for your young or even unborn grandchildren?
Inevitably, some form of trust arrangement is required. The suitable trust depends on how much control over events you wish to retain after you death. Tax consequences should be borne in mind as well but should not lead decision making.
You may wish to leave your farm to your husband or wife in the first instance, but you still need to consider the position once both of you have died, or if you die at the same time.
Who would you appoint as your trustees? Your non-farming children, while not farming themselves, may be suitable custodians of the farm. Alternatively, you may wish to appoint professionals, such as a land agent, accountant, or solicitor. This ensures competence and independence, but professionals will usually charge for their services. Is there a trusted friend, who might also bring farming expertise? A mixture of laypersons and professionals can be a good idea.
What type of trust should you use? At its simplest, you could leave your farm to one or more grandchildren to receive at the age of 18, or at some later age. If you are certain one grandchild will take the farm on, this fixed trust may be appropriate but it does mean that they will take the farm even if they decide to not farm.
A discretionary trust offers more flexibility. You could name all of your grandchildren as potential beneficiaries, and leave it to the trustees to choose what to do after your death, guiding them in a letter of wishes as to the aspects they should consider. For example, you might ask them to allow a grandchild to farm the land when they have finished school or agricultural college, but only to transfer the land to the grandchild after they have married. Alternatively, if there are a few grandchildren who show an interest in farming, the trustees could be guided as to how to select a successor or successors. Should grandchildren farm the whole together, or occupy separate parcels? If the farm is sold, the trustees could distribute the proceeds equally.
What will the trustees do with the farm after your death before the next generation starts farming? The simple option is to let the land on a tenancy until the grandchild is ready to take the farm on. Alternatively, the trustees may wish to farm themselves, perhaps using a contract or share farming agreement. Farming in partnership would not generally be recommended outside of a family situation, as the trustees would be jointly and severally liable if the partner does something wrong or unlawful. Tax considerations would be important in their choice of farming structure.
Dealing with future unknown future events and personalities can be difficult but there are flexible options available for those who want to plan for the future when they have gone.
For more information and advice on your circumstances, please contact a member of our Private Client Team at our Malton office.