Pam Johns, Head of Rural Services at Coodes looks at the three D’s and why young farmers should be planning for the future.
Death, divorce, and disputes may sound like particularly gloomy subjects but very sadly these are three topics that young farmers should consider when succession planning for the family farm.
Whether you’re a landowner or tenant farmer, generations of agricultural families will be affected by one or more of these issues at some point in their lifetime.
The implications of not having taken the right advice and putting plans in place could be more costly than getting your ducks in a row in advance. Who will run the business should the worst happen?
Farmers of the future
The younger generation of farmers are the future – farms are complex businesses and often each family member will play a different role in its success. Succession planning should take a ‘whole family’ approach – there needs to be open and frank conversations, so that each family member knows exactly where they stand. Discussions should involve not just lawyers, but accountants and land agents – it should be a joined-up approach.
With margins being squeezed, as well as subsidies and the basic payment scheme being phased out, young farmers may have to diversify to survive. Farming is a lifestyle choice, involving lots of hard work and very long hours.
Nearly four in 10 UK farmers are over the age of 65, with an average age of 59, so it’s incredibly important to encourage the younger generation to continue farming. We need that new young blood coming through.
Championing young farmers
Celebrating the work of young farmers is something that Coodes is proud to do – the firm has been supporting South West Farmer’s ‘Young Farmer of the Year’ award for a long time and it recognises excellence in the agricultural sector.
Young farmers are the lifeblood and beating heart of the industry and shining a light on them, celebrating their successes is very important. Few young farmers do it for the money, it’s the love of what they do that drives them forward. We must do everything we can to encourage the next generation.
One of the most crucial elements of succession planning is ensuring that valuable reliefs are not lost as farms are passed down. This should include Inheritance Tax planning and other key agricultural and business property reliefs. When succession planning, everything must be structured, so those valuable reliefs are maintained.
Another key consideration should be partnership or shareholder agreements, whether this is for a group of individuals or a limited company, it’s crucial to make sure what’s in place is up to date and is compatible with any wills.
Huge swathes of the farming community don’t have anything in writing and don’t consider retirement, death, or disputes. Relying on legal provisions from the 1800s is far from ideal, so it’s vital to take this into account in the family discussions with the professional advisers.
We are involved with lots of succession planning for farmers, looking to pass their business onto the next generation – some of these discussions may or may not involve lenders, as they need to be onboard from the outset.
Very often farms are run by several family members and so it’s not uncommon for a partner or spouse to have to work ‘off farm’ to bring in other income streams. Farms often take a multi-faceted approach and so there are many issues to consider these days including taxation, rules, and regulations.
Sadly, we have dealt with many farming divorce cases and it’s not uncommon for the farming successor to be married to a non-farming spouse. You might want to think about pre or post nuptial agreements to protect the family farm’s assets were there to a be a split in the future.
Any legal documents should be integrated, and it is advisable that they all link to each other.
Death is not a subject that many farmers want to talk about and so planning for the inevitable is often pushed aside for another day. Young farmers may not necessarily have thought of having a will in place, but the reality is that if you are running a business, this is imperative.
The repercussions of not having a will can be stressful and upsetting for all involved. Even if you are in your teens or 20’s, if you are involved in the business, it is advisable to act now.
It is well known that farming is one of the most dangerous industries to work in and the risks associated with having an accident at work are amplified in agriculture. An accident might not result in death but might mean you are incapacitated so having a Power of Attorney in place might be a sensible decision.
Who would run the farming business if something happened suddenly or unexpectedly? The consequences of not planning could be significant, costly, and lengthy.
Disputes can take all forms when it comes to farming – it may be boundaries, grants, subsidies, access, or unregistered property leading to claims for ‘squatters rights.’
In my experience, there are many farms in Cornwall and Devon that have never been registered at the Land Registry and the registration could assist in heading off any claims for ‘squatters rights.’
With land prices at record levels and increased buying and selling activity, there is a shortage of supply to meet demand and I don’t see this changing anytime soon.
Although each farming dispute must be taken on its own merit, there are proactive steps you can take to avoid headaches later.
The main advice is to ‘take advice’ – gather information from all the sources you can. If you’re a young farmer, perhaps your college or young farmers club might be a good place to start. Bring in an example of someone you know who has been through a similar process.
Whatever your position, starting those conversations now and organising your affairs in advance could save you a lot of time and money in the future.
Coodes has an agricultural and rural team trusted by generations of land-owning clients, offering a wealth of legal advice on buying and selling farms, setting up Community Land Trusts, farm tenancies, disputes, diversification, trusts and tax, partnerships, and environmental issues.
For more information about any of these issues and for further legal advice, contact Pam Johns on 01409 255902 or email email@example.com.