Posted: 19th July 2016
Working on an assumption can be a dangerous way to deal with your affairs, especially when that assumption forms the basis on which you think your family will inherit your estate when you pass away.
On many occasion I have had someone say to me “it will just go to my wife/husband won’t it?”. The answer to the question is not necessarily. If you die without making a Will the distribution of your estate is governed by the Intestacy Rules. These were changed recently and for those people who pass away without making a Will, after 1 October 2014, those new rules apply. These intestacy rules can have a significant impact on a farming family unit if a business is involved and if there are some children of the family who work on the farm and others who have ‘flown the farming nest’.
The main issue of which to be aware, is that if you are not married, the assumption that your partner will benefit from your estate is incorrect. If, when you pass away, you were not married but had a child or children, then they would take the benefit. This would clearly cause an issue if you ran your farm with your partner and had minor children. However, should you not have children, it would be your parents that benefit from any assets which you owned and potentially, took control of your farm business. This may be entirely in conflict with what you would expect to happen and the only way in which to ensure your assets are distributed as you would wish, is to have a Will in place.
Where you are married, the value of your estate will determine who benefits and to what extent. If your estate is not worth more than £250,000 (where the date of death is on or after 1 December 1993) your spouse would receive the entirety of your estate. The problem arises when an estate is worth more than £250,000 and this is often the case in farming scenarios. Your spouse would still benefit but only to the extent that they would receive:
The other half of the balance your estate would be shared equally between your children, or their descendants, if any of your children predecease you. This could give rise to a situation where a minor has an interest in your estate and whilst not itself an issue, it can become problematic if that interest take the form of an interest in a farming business. If a situation arose whereby you did not have children or grandchildren, then your estate would pass in its entirety to your spouse. That being said, you may wish to make gifts to friends or charities. The Intestacy Rules do not take account of those considerations. The only way to ensure that that particular gift could be put into effect is to draft a Will.
The Intestacy Rules also govern whom is appointed Administrator of your estate. This role is the same as an Executor however, a different term is used as the appointment does not derive from a Will. You may have a particular person that you would like to act on your behalf or you may feel that it would be prudent for a professional, such your land agent or farm accountant, to be appointed along with a family member, but again, the Intestacy Rules do not take account of that. The rules govern who is entitled to apply to the Probate Registry to obtain the Grant of Representation, and ultimately, deal with your estate.
Succession Planning is a “hot topic” at the moment and has recently been the subject of a NFU campaign but it has always been the case that in order to direct your estate to those beneficiaries whom you wish to benefit, a Will has been required to record the wishes of the deceased.
Will drafting in an agricultural environment is particularly important and parties should be encouraged to get around the kitchen table to discuss how matters will be dealt with in the future. If there is an ongoing business, how that will be dealt with going forward? These types of discussions also provide a good opportunity to assess whether there is any need to put other documents in place such as Partnership Agreements or Lasting Powers of Attorney, which can be used for both personal and business situations. There may also be tax planning opportunities to be taken advantage of, to ensure that the assets which you have built up over the years, are subject to the minimum amount of tax possible.
Forward thinking and planning whilst everyone is able to have a conversation, is always preferable to having to deal with a dispute that arises when someone passes away. It goes without saying that disputes where the person whose account matters the most is no longer with us, are difficult argument to be had.
Wright Hassall have expertise in both the drafting of documentation and dealing with any disputes which arise when someone has passed away. Our team advise on all areas of agricultural law. Should you have any queries in relation to this article or your farming business please feel free to contact me.