- April 13, 2019
- Bob Quinn
Peter Young, dairy farmer, businessman and former ‘Money Mentor’ with the Irish Farmers Journal believes that equal is not always fair when it comes to succession. Peter touched on this theory at the information evening I hosted recently in Naas, Managing Your Affairs in Sickness and in Health.
This statement resonated with a lot of people, and they weren’t all farmers. I thought it worthwhile to delve a little deeper into what he meant by it.
Being seen to be fair
Peter is adamant that there is no obligation to divide up an estate fairly. It is up to the parents how they pass on a farm or indeed any assets. Having said that, he acknowledges that farming families often struggle with the need to be seen to fairly divide up farm assets for the next generation. There are two primary reasons for this, he believes. The first is the strong emotional attachment to land and a desire to see it stay in the family and second is the likelihood that the parcel or folio passed on has the earning potential to provide a living.
To illustrate the latter point, let’s say a farmer has four children, but only one child is farming. The father wills that the farm be split into four equal tracts. To expect the child who is farming to buy the siblings out could burden the farmer with unsustainable debt. Could the farm recover from it? The last thing the older farmer would want would be to pass on an unviable unit.
The farmer gets the land
Let’s say the three non-farming children went to university, funded by the parents and the forth, who stayed at home to farm, inherited all the land. Is that fair? On paper, he will be rich, unfairly so, his brothers and sisters might say, but his income may well be lower than his siblings’ and it could be argued that his choice to farm makes for a harder life – no weekends off and the difficulty of going on holiday. The children who received third-level education now have good jobs and good incomes. That division of the estate is not equal, but might it be fair?
Farmers often look at the farm in terms of viable units such as out farms or sites. Peter’s advice on sites is to be specific about where the site should be. If the will says X child (not a farmer) may have a site of their choosing, that child could possibly pick a site in the middle of the biggest, most fertile, south-facing field. The parent would never dream of selling a site in that field, and yet, by not being prescriptive, he could inadvertently hamstring the next-generation farmer.
Elaborating on his point that there is a strong emotional relationship to land, Peter suggests that where farmers have more than one child, they consider investing their wealth in assets other than farmland; like a rental property or investments. These assets can be passed without the same attachment. But this requires planning.
Young trained farmers and Revenue reliefs
Of course, many farmers pass on land while they are still alive by way of a Revenue provision which gives full relief from stamp duty on the transfer of an interest in agricultural land.
There are other reliefs such as retirement relief, agricultural relief and stamp duty relief which aim to encourage farmers to pass on agricultural land long before death. These can significantly reduce tax burdens and have the added advantage of opening up the conversation earlier within farming families than in the average household.
I am the son of a farmer, and I know of many instances where the passing on of the land and other assets has driven a wedge between families.
If you’re concerned about any succession issue, whether it’s related to farmland or not, don’t hesitate to get in touch for a no-obligation chat.