Karen Walsh: Should I pass on the farm to my son now or when I have passed on?

It very much depends on a wide variety of factors, such as family circumstances, whether there is a child farming and the tax implications

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Dear Karen

I am farming since I left school when I turned 14, and now I have a son about to turn 35 in the next few months, and I cannot make up my mind as to whether I should transfer the farm to him in my lifetime, or if I should leave it passed in a will? If I am going to do it in my lifetime, I really should make a decision now before he turns 35, so he can avail of young trained farmer relief.

I am getting a lot of advice from neighbours and friends, and a lot of them are saying I should leave passing my will and hold on to it for security, and then others are saying I have a good son who is very interested in farming, and I should give it to him while he is young.

He has lots of ideas for the farm and he has his agricultural qualification done, and he is at home with me all the time, and he is a good lad. What would you advise? What are the pros and cons of transferring the farm in my lifetime as opposed to holding on to it and leaving it passed on until my death?

Dear Reader

This is one of the most common questions I am asked year after year, ie, “Should I transfer the farm in my lifetime or leave it passed in my will?”. This is not a question I can answer for you. I can give you some information and the pros and the cons of both, but ultimately at the end of the day, it is your decision and your decision alone.

There is no right or wrong answer to the question, as it very much depends on a wide variety of factors, such as family circumstances, whether there is a child farming, the tax implications involved for both you and your son, whether the child has an agricultural qualification, the need for nursing home care, your age and the age of your son and whether any other children need to be looked after, etc.

The single most important piece of advice I will give to you at this stage is to make a will or update an existing will to ensure it reflects your wishes and to ensure that the farm, in the event of your untimely death, passes to your son who is at home farming with you.

While you are deciding what to do, you will have a document in place that reflects your wishes and protects your family and/or the interests of your son who you would like to leave the farm to. I have seen some very sad situations where there has been an untimely death with no will made, which results in the person at home farming being left in a very vulnerable position.

Delaying the farm inheritance

Some of the advantages in respect of leaving property pass in your will would be that you have control over the farm for the rest of your life. You own the property until you die and you can do with it as you wish. This can provide emotional and financial security. You can change your will at any time before you die, and the will only speaks on death, so if circumstances change, you can change your mind and update your will.

There is only one tax involved in respect of leaving it passed in a will, Inheritance Tax. There is no Stamp Duty or Capital Gains Tax payable when you leave property in a will.

As regards nursing home care, at present, you have a son farming, and if you have to enter into nursing home care, there is an exemption now in respect of farmland, where the value of the farm is capped for three years, provided you have a successor in place at the time of the nursing home application who will farm the land for a certain period of time and comply with certain conditions. However, if you have to enter into nursing home care and your son changes his mind about farming or loses interest or motivation and decides to work elsewhere, the full value of the farm will be taken into account for the entirety of the time that you are in nursing home care unless you have a successor in place at the time of the application.

The disadvantages of transferring the property in your will would be your son may expect to receive the farm in your lifetime, and there may be bad feelings and low morale if you hold on to it until your death. You say your son is very interested, has obtained his agricultural qualification, and is farming at home with you and is a good lad, so it may affect morale or interest if you do not transfer the land in your lifetime.

Probate will need to be applied for by your Executor to administer the Estate. Probate is a legal process in which your will is filed with the Probate Office. During the process, the will is authenticated and the Executor is granted authority to act on behalf of the Estate as expressed in your will. Until the probate process is completed, the Executor of your will cannot distribute your property to your son or other beneficiaries named under your will.

Transferring the farm now

The advantages of transferring the property in your lifetime would be that your successor gets the benefit of the farm immediately and can grow the business. Motivation and interest is enhanced. You cannot farm forever and will be thinking about retiring someday in some capacity, and you will need someone to look after the farm when you may not be able to or when you would like to retire.

Transferring the farm will give your son more responsibility and more motivation with running and growing the farming business.

Once you transfer a property in your lifetime, you will have given away a valuable asset and cannot take it back. However, you can put covenants into the Deed of Transfer, for example, the right of residence in the farmhouse, or the right of maintenance for you and your wife, or both, to ensure you are protected.

If your son passes away, it will pass according to his will or under the rules of intestacy, if he did not leave a will. If he were to divorce in time, it would form part of the assets in a family law matter. However, you can put covenants into the Deed of Transfer, for example, the right of residence in the farmhouse, or the right of maintenance for you and your wife, or both.

You lose control over the asset. You will have no say if the property is sold or mortgaged unless you have the right of residence in the farmhouse. There are three taxes to examine on a lifetime transfer, Stamp Duty, Gift Tax and Capital Gains Tax, but there are excellent tax reliefs that may be available to you and your son. Your son is about to turn 35 and provided he satisfies the conditions for young trained farmer relief, he will have no Stamp Duty to pay on the farmlands.

Karen Walsh, from a farming background, is a solicitor practicing in Walsh & Partners, Solicitors, 17, South Mall, Cork (021-4270200), and author of Farming and the Law . Walsh & Partners also specialises in personal injury claims, conveyancing, probate and family law.

Email: info@walshandpartners.ie

While every care is taken to ensure accuracy of information contained in this article, solicitor Karen Walsh does not accept responsibility for errors or omissions howsoever arising, and you should seek legal advice in relation to your particular circumstances at the earliest possible time.

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