I am increasingly finding that there is no son or daughter interested in taking over the family farm and while many of them like the idea of inheriting and owning the farm, the reality is that they probably never will will farm.
he time is more or less but not quite over when the farm is left to the eldest son living abroad. In my time I have seen numerous instances of this, which is obviously unfair to the other siblings that parents can often rely on during their fall years to take care of their needs.
An estate plan may involve making a will and passing on your assets after your death. Alternatively, it may involve passing on assets during one’s lifetime, but typically it is a combination of both. Ensuring that the Revenue Officer or HSE does not get a good share of the proceedings often requires a degree of planning which may involve passing on some of your wealth, particularly your land, while you are alive.
In general, my advice to farmers who have a number of children but none are home on the farm or are likely to be home on the farm is generally based on four main conditions:
1. Make sure you are able to actively participate as much as you want and for as long as you want.
2. Make sure you have enough income from the farm to support your current lifestyle for as long as you are likely to need that income.
3. Divide your wealth fairly and equitably among your children, taking into account who gets what.
4. Make sure the tax officer gets as little as possible.
This is an extremely important element of any estate plan for many people. No amount of money in the world will ensure that you have nothing to get up in the morning. Granted, some are happy to retire and don’t mind seeing the farm leased out, but many want to stay active and carry on more or less as they have been up until now.
This can also be easily achieved in the case of a property transfer. Typically, these days, partnership is the preferred route, allowing the farmer to retain some level of control if they so choose. Such partnerships may be established in anticipation of a transfer at a later date or at the time of the transfer.
MAINTAIN SUFFICIENT INCOMES
Farmers today live longer, more active lives, and many will not want to hang up their boots until they are physically unable. Again, the partnership structure can allow the farmer to pay a partner salary that can be as high or as low as the partners agree.
If the plan calls for the land to be transferred and then leased, the retired farmer’s ability to access cash can be a little more difficult, but not impossible. One possible way is for the new landowners (probably son or daughter) to use the annual allowance to pass money on to their parents.
If both parents are alive and the son or daughter is married, this can add up to €12,000 a year without any tax consequences for either party as the lease on the property is presumably tax free. Of course, if the land goes to more than one child, the possibilities are even greater. Another possibility would be if the deed of transfer contained a clause requiring the son or daughter to pay a set amount annually for as long as the parents are alive.
A FAIR AND JUST DIVISION
A fair and equitable division of your wealth may not always be easy, but it is always desirable if you want to ensure that your enduring legacy is not marred by family disputes. In general, land may have limited access and not readily lend itself to partition.
These are matters that may require good professional advice. Over the years I have often witnessed some perceived injustice in the distribution of the deceased’s wealth. Identifying your children’s specific preferences can be very useful in creating your estate plan and avoiding future problems.
AVOID TAX TRAPS
There are three taxes that must be considered in any estate plan. These are capital acquisitions tax (gift/inheritance tax) in the case of gifts and inheritances and capital gains tax and stamp duty in the case of gifts but not inheritances.
All of these taxes entail certain benefits when they relate to agricultural wealth, which, if fully utilized, can significantly reduce or eliminate any tax burden. It doesn’t take a very large operation to surpass €1m in value these days and such an inheritance without relief could prove disastrous. For most farmers, capital gains tax is generally not an issue in family transfers, but capital gains tax is not.
In the vast majority of cases, whether you are entitled to farm relief or business relief is crucial if tax is to be avoided. Both reliefs grant a 90 percent reduction in the taxable value of received farm property, making most farm transfers tax-free. Eligibility for these facilities can be simple in many cases, but can be quite complex in certain circumstances.
Estate planning is important to most farmers, even though they may not think so. Putting a little thought and effort into your estate plan can be a time and money wise investment and can save a lot of hassle and expense down the line.
Martin O’Sullivan is the author of the ACA Farmers’ Handbook and is an agricultural business and accountant based in Carrick-on-Suir; www.som.ie
https://www.independent.ie/business/farming/agri-business/finance/martin-osullivan-how-to-plan-for-your-estate-where-there-is-no-successor-41823958.html Martin O’Sullivan: How to plan your estate when there is no successor