Succession is a process, not an event
Each year, there is a huge amount of interest and queries in relation to succession and the transfer of the family farm.
Sometimes, there are cases whereby one or both of the parties are nearing the age of 35 or 66 years, and the pressure is on to transfer the farm in advance of those milestones.
But the single piece of advice I would give to farmers thinking about succession is to view it as a process, rather than an event.
It takes time, research, and clear communication, and should not be rushed into towards the end of the year.
Implementing an effective succession plan involves more than minimising the tax payable. Succession should be considered from every angle.
One of the main questions I come across each year is, “Should I transfer the farm in my lifetime or leave it pass in my will?”
There are advantages and disadvantages of leaving farmland in your will, as against a lifetime transfer, and the best decision for you and your family will be dependent on your own personal and financial circumstances and needs.
Many parents wish to transfer farmland to their children during their lifetime, to avoid probate proceedings on their death, or because they want the children to have the use of the property during the parents’ lifetime.
The Nursing Home Support Scheme Act, 2009, more commonly known as “The Fair Deal Scheme“, also adds a completely new dimension to the voluntary transfer of farming assets by a farmer to a child.
Disadvantages of transferring property in your lifetime
Once you transfer the property in your lifetime, you have given away a valuable asset and cannot take it back.
However, you can put covenants into the Deed of Transfer, for example, a right of residence in the farmhouse, or a right of maintenance, or both.
You lose control over the asset.
You have no say if the property is sold or mortgaged, unless you have a right of residence or maintenance over the property.
You lose a valuable asset. You need to ensure beforehand that you will be financially secure into your old age without the farm, before you transfer.
Advantages of transferring property in your lifetime
You avoid probate, if your remaining assets on death are under a certain value, and you do not own any other real property.
The successor gets the benefit of the farm immediately, and can grow the business. Motivation and interest are enhanced.
You will have fewer assets that are available to be taken into account, in the event that you have to go into a nursing home, subject to the five-year ‘look-back rule’.
Disadvantages of transferring property in your will
Your successor may expect to receive the farm in your lifetime, and there may be bad feeling.
He or she may lose interest and pursue other ventures and careers.
You will have to declare your farmland in any application for the Nursing Home Support Scheme, and the Nursing Home Support Scheme will take into account the value of your farmland when assessing your means and the contribution you must make towards nursing home costs.
Probate will need to be applied for by your executor, to administer the estate.
Probate is a legal process on which your will is filed with the Probate Office.
During this process, the will is authenticated, and the executor is granted authority to act on behalf of your estate, as expressed in your will.
Until the probate process is completed, the executor of the will cannot distribute your property to your family members or other beneficiaries named under your will.
Advantages of transferring property in your will
You have control over the asset for the rest of your life. You own the property until you die.
You can change your will any time before you die.
A will only speaks from death.
Therefore, during your lifetime, you can make a will, revoke it and/or amend it as frequently as you wish.
You have the security of the farm for the rest of your life.
The above is only a broad outline of some of the advantages and disadvantages of transferring property in your lifetime or leaving it pass in your will.
You will need to take legal advice in relation to your own situation and circumstances.
But if you are thinking of transferring the farm before the end of the year, you should start the process as soon as possible, and explore the matter from every avenue, to ensure matters are not done in haste!
See walshandpartners.ie/blog for more!