A leading solicitor is urging farmers to formally legalise agreements around the future of their farms following the publication of a groundbreaking study on farmers and dementia.
 
The in-depth research, which was carried out by Plymouth University and reported on by Farming Online earlier this month, and is the UK’s first ever to address dementia in farming and rural communities, revealed that farmers had few plans in place to protect their businesses from the effects of dementia.
 
It also found that farmers were often concerned about what might happen to the farm but reluctant to take steps to address the issue, that few had kept their wills up-to-date, and that crucial legal steps such as setting up a Lasting Power of Attorney to ensure someone could take over the operation of the business were not being carried out.
 
The findings echo the experiences of solicitor John-Paul Dennis, partner at leading law firm Kirwans, who regularly acts for farmers looking to safeguard the future of their business.
 
“This type of research is vital, as it highlights the very real problems that are happening right now as a result of a failure to prepare for ill-health or death,” said John-Paul.
 
“Time and time again we see farming families being put under unnecessary but immense stress purely because plans were not put in place.
 
“As Dr Claire Kelly, one of the authors of the report, said, a farm is more than a business; it is an integral part of family life, so the loss of it in the event of ill health can be absolutely devastating.
 
“Plans to hand over financial responsibility for the farm can indeed take months to put in place if the owner becomes unable to act for themselves, and in that time businesses can easily go under. That’s why it’s so important to make arrangements long before they appear to be needed, so that should the worst happen, the farm is able to continue operating as a business.”
 
One of the main recommendations of the team’s findings is to plan ahead for the eventuality of ill health. Here, John-Paul sets out the five most important legalities farmers should prepare in order to safeguard the future of their farms.

1. Lasting Powers of Attorney (LPA): Lasting Powers of Attorney are vital to ensure the farm can continue to operate and prosper. There are two types, one which covers health and welfare decisions and one for property and financial affairs. They are very important, as they empower the appointed attorney to make decisions such as leasing farming land or selling assets if the owner of the property loses mental capacity or begins to suffer with dementia. Even retired parents who no longer work the land but have a legal interest in the holding should put an LPA in place, with any non-farming family members consulted also. Being open and frank with all concerned is vital.
2. Review of the farmland: A legal review of the farmland should be carried out, looking at how it is held, by whom and on what agreements. Often agreements are not written down and are based on a handshake. This is risky at the best of times, but if one of the parties begins to suffer from dementia, enforcement of any terms can be difficult. Get your ducks in a row and have agreements recorded in writing and signed.
3. Wills and succession planning: Wills and some estate and succession planning must take place – ideally, as happened with a client of mine, in a situation whereby all concerned with the farm (in this particular case it was three generations) sit around a table to discuss their aims and objectives. Wills must deal with promises made to family members to avoid claims later on. They must also cover land entitlements, otherwise they can form part of the residue of an estate and could end up in the hands of a party with no land thus negating the entitlement.
4. Agreements on management and ownership: A key decision to be made is who will be involved in management and who will have a share of the ownership of business assets. Family history, ambition and expectation often complicate these discussions and so invariably they get put off. It is vital to have an open and frank conversation to enable a successful outcome. The farmland will not benefit from being caught up in legal wrangling by the surviving children.
5. Decisions on how to handover property to your children: Consider lifetime gifts but involve your accountant as the timing of gifts and other arrangements can have tax consequences. Despite frequent warnings, many families still risk loss of Agricultural Property Relief by leaving the older generation in the farmhouse and giving away land to equalise distributions ‘fairly’ amongst the children.