Farming News - Family Farm Sales on Increase
Family Farm Sales on Increase
The West Country is seeing more and more family farms being put on the market because of changes in inheritance practices, says estate practitioner Stuart Thorne, a partner at Clarke Willmott LLP.
Stuart says there are more examples that parents are no longer leaving their eldest son to inherit their entire or main estate, known as primogeniture, preferring instead to divide the legacy “fairly” between all their children.
“Attitudes to inheritance and primogeniture are becoming more flexible,” said Stuart a Trust and Estates Practitioner specialising in lifetime tax planning and succession issues for farmers and landed estates.
“Now, while parts of the farm, such as superfluous farm cottages or commercial buildings which are now let, do give some flexibility to provide for non-farming children, pressures on farming profits and the need for larger units add difficulty to these succession decisions.
“It is also often the case that bright children obtain professional qualifications and then pursue careers elsewhere, when perhaps it is they who should be taking over the multi-million-pound business.
“We are now seeing more farms being sold because the farm is not big enough to fulfil the ambitions of the children. The siblings all want their fair share and the only way they’ll ever agree with that may be sale and division of the proceeds.
“Twenty years ago, you would never have believed that these farms would pass from the family who may have been there for generations.
“We also have more lawyers now doing contentious estate and trust work than ever before and the sheer value of farms is a key factor causing dissatisfaction between children who perceive themselves to be unfairly treated”.
“It comes at a time when farmland prices are edging downwards, and land currently being snapped up by investors because of generous tax breaks on inheritance. It is then run by contractors rather than the people who may have farmed the land for generations.”
Stuart is urging farming families to be more proactive and start looking at the succession situation when their children are as young as 15 or 16 to avoid possible acrimony further down the line.
“It is important to try to gauge what the siblings want from the business and the property in years to come and give them the chance to be honest about their ambitions and objectives,” added Stuart.
“We would advise establishing a family strategy, periodic meetings together as a group to concentrate on the major issues, with an independent third party alongside to ask the difficult questions.”
Wills should be drawn up alongside restructuring plans and such plans must be reviewed, in conjunction with the family Solicitors and Accountants.
- Leaving the non-farming child any farm cottages or let units with significant capital value. The farming descendent can borrow money if necessary, with low interest rates, to top up bequests to non-farming siblings.
- Retaining the farm in a family trust to allow the farming child or children to farm the land, possibly rent-free, with the capital owned by the trust; alternatively, a proportion of a rent could be paid to the non-farming siblings. If the farming ceases in years to come, an equitable division may then be made between the children.
- The windfall of a development sale can be shared fairly between the children if the property is owned within a suitable trust.
- Psychologically the farming child may feel that they should be owning the farm, but a carefully worded letter of wishes may be reassuring.
- With the sheer capital value of farms, the non-farming child who has inherited a cottage might see the farm sold in years to come and feel rather sore on the subject if there is no fair distribution at that stage.
- Some set up and compliance costs, but these may be good value in the context of underlying values.