A lot of what we have stated in our web page “Business Succession”, where we advise on the various legal issues surrounding Family Businesses, Family Business Disputes, Family Business Employment Law Issues, Family Business Governance, Family Business Ownership Structures and Re-organization naturally also applies to the administration of the Farm Business and Succession issues relating to that Farm Business.
There are however specific issues which will relate to the transfer of a Farm Business and Morgan McManus Solicitors have considerable experience in this area.
Farm Succession Planning
The ACA Farmers Handbook (published annually) refers to the constituents of a Succession Plan and wisely advises on the various practical issues which should be considered in any farm transfer, whether that is by way of a Deed of Transfer or by way of a Will. These include such issues as Taxation considerations, Spouse`s opinion, considering and consulting other family members, dealing with the farm dwelling, future care needs and costs of trensfer.
In particular, where legal advice is required from Morgan McManus Solicitors, there are Taxation considerations and Succession Law considerations.
The taxes which need to be considered, from a Capital Taxes viewpoint, are Capital Gains Tax and Capital Acquisition Tax. Many Transferors are under the misunderstanding that, because a gift of land does not involve a money payment, the transfer is not subject to Capital Gains Tax. Such a Transfer is however considered by the Revenue Commissioners to be a “disposal” and therefore the timing of such a Transfer is of considerable importance.
Where Capital Acquisitions Tax is concerned (whether that is by way of Gift or Inheritance) a Farm can often have a considerable market value which in the normal course could well-exceed the child’s Capital Acquisitions Tax Threshold. The child however may qualify for Agricultural Relief. In some circumstances where such Relief is not available, the child may qualify for Business Property Relief.
In certain circumstances a nephew or niece of the Transferor, who has worked on a full time basis on the farm, will be deemed to have a relationship to the Transferor as that of a child in regard to business assets; thus qualifying for Favorite Nephew Relief.
Morgan McManus Solicitors will advise on all of these issues before a final decision is made on any Transfer.
Should I transfer all of my Farm?
In certain circumstances, a transfer of the whole farm may not be appropriate at that particular time. Sometimes it might be wise in the first instance to enter into a Farm Partnership with the proposed Transferee or form a Limited liability Company with the Transferee where both parties then maintain a meaningful involvement in the running of the farm business and only thereafter the farm assets are transferred over a period of time.
Matrimonial or Financial Difficulties?
Sometimes a Farm Transferor may be worried about transferring the farm to his/her child where there are concerns about matrimonial or financial difficulties. These issues require detailed attention and Morgan McManus Solicitors will advise on the appropriate course of action which should be taken to hedge against any such possible difficulties.
On the other hand, the Transferor may need to consider the possibility of future Nursing Home care under the HSE Fair Deal Scheme, where all assets owned by the Applicant under the Scheme in the previous 5 years are included in the HSE Assessment of Means.
Morgan McManus Solicitors will advise on all of these issues to ensure that the correct decision is made.
Succession Law Considerations
No Transfer or Will should be considered by a farmer without taking advice on Succession Law issues.
In particular, a farmer needs to be advised of the spouses/civil partner’s absolute right to inherit a defined share of their Estate, in circumstances where it may be appropriate for that spouse/civil partner to be given independent legal advice prior to the signing of any documents – to ensure that the transaction is not challenged at a later date.
Section 117 Applications
In certain circumstances where a Court is of the opinion that the Testator (the person making a Will) has failed in his/her moral duty to make proper provision for a child in accordance with his/her means, whether by their Will or otherwise, the Court may order that such provision shall be made for that child out of the Testator`s Estate as the Court thinks just.
In the circumstances, the farmer is required to consider whether in choosing to benefit a particular child he/she may be depriving another child and creating circumstances where the farm disposal could result in a Court Application by that child seeking to set aside the transaction.
Again, Morgan McManus Solicitors will advise on all of these issues, ensuring that any disposal of the farm is done only with all relevant issues considered.
Finally, prior to any decision being made by the farmer on the disposal of their farm, Morgan McManus Solicitors will furnish a full and detailed Estimate of Legal Costs to the farmer before the transaction commences.
Let us help your family business thrive for the next generation
If you need advice on passing your business to the next generation or need solutions to the day-to-day legal problems of running a business, then please contact us.
Legal advice is available.