Are your affairs in order?

Wills

Our recent survey undertaken by RAG UK, a national affiliation of agricultural accountants who deal with more than 5,000 farm businesses meeting regularly to share ideas, shows that 43% of farmers have an outof-date Will or no Will at all.

Unfortunately, it is one of the very few known facts – one day we will all pass away and as Jeremy Clarkson reminded us, farming is still one of the most dangerous professions in the UK. Given the certainty, why is it that almost half still need to address it? Often it is considered too hard or a cost that is not essential in this year’s budget. However, as well as considering your assets a Will defines who you wish to look after your children and, as a new mum, this is something that certainly made me sit up and think!

In relation to your assets, dying without a Will (in intestate) means that the rules of intestacy kick in. The first £270,000 goes to the surviving spouse, if there is one, with the remainder of the estate being split 50% to that surviving spouse and 50% equally split between the children. We should note that estranged children have the same right, but stepchildren do not.

Should you pass away without any surviving family such as children, parents/grandparents, aunts, and uncles etc, and without a Will, then the Crown will take your entire estate.

In short, should you pass away without a Will your hard-earned assets could end up with someone you did not intend.

Lasting power of attorney

Whilst we are on ‘awkward’ subjects – almost the same number of farmers also did not have an up-to date lasting power of attorney (LPA). Of the farmers who completed the survey 41% said they needed to do one or update the one they had.

Should you no longer be able to, an LPA enables someone to make decisions for you or help you to make them. By the time you require an LPA it is often too late to get one, but having one can help safeguard the running and future of a farming business. Due to our role, as accountants, we focus on the property and financial affairs LPA but there is also a health and welfare one.

Although normally associated with old age, an LPA can prove invaluable in the case of a sudden accident where, with an LPA, the attorneys can step in to run the bank account, pay staff etc. It should go without saying that you should implicitly trust the attorney you appoint. Should you be appointed as someone else’s attorney you appreciate the responsibility that comes along with the role. It is recommended to have a mix of individuals – you can have up to four attorneys.

When it comes to later life planning we benefit from working with my fellow Partner, Louise Osbourne who is accredited by the Society for Later Life Advisers (SOLLA) and specialises in financial, tax, and investment planning strategies for retired clients or their Attorneys and planning for the cost of long-term care. Louise also volunteers as a Dementia Friends Champion for the Alzheimer’s Society.

Partnership or shareholders agreements

Finally, another legal document that can be incredibly valuable is a partnership or shareholders agreement. It was pleasing to see 56% said that they had an up-to-date partnership or shareholders agreement. Although pleasing, 44% do not have such an agreement and it was also a little surprised when only 26% confirmed that they have succession plans successfully in place.

Drawing up a partnership agreement can be a positive exercise ensuring that everyone knows and agrees where they stand. Without a partnership agreement should a new partner wish to be appointed or a partner dies or retire, the matter would all be settled under the provisions of the Partnership Act 1980. This may lead to an unexpected or unwanted outcome. Under the act, the death of a partner means the partnership has been dissolved by law, despite there being other surviving partners. This alone can cause complications, particularly with the bank, many of whom encourage farming families to have partnership agreements to prevent bank accounts from being frozen on the death of a partner – the last thing you would need in that position.

Understanding what is partnership property is often a much bigger question than you may think. It is critical that your financial accounts and partnership agreement agree on the ownership of assets. Given the value of farmland and property today and the number of court cases that have appeared over the years it is critical that this is agreed upon and consistently shown throughout the documents. Any partnership assets will be dealt with as part of the partnership, and therefore may not even be included in your estate as an individual asset to be passed down as your wish. Whether an asset is partnership property also has significant implications for inheritance tax and the possibility of claiming 100% business property relief. Finally, in some circumstances, the trading profits of a business may vary year on year, as agreed by the partners, but this can sometimes have unintended implications on the ownership of the assets if not properly considered and documented.

Finally, a partnership agreement will state on the basis on which a partner could be ‘bought out’, the valuation basis, and the timing of the payment. There is a large valuation difference between someone being paid out on the ‘book value’, as shown in the accounts, or someone being paid out at open market value.

For some, they will say it is an optional cost and one which could be postponed for another year. However, I would have to ask if you can afford not to have your affairs in order. The past 18 months will have demonstrated that even the most unexpected events can occur and sadly there have been some local farming accidents reminding us all how real these events can be.

Organising your affairs in advance is far more cost-effective than having to after you are no longer capable of doing so.

We do not draw up legal documents ourselves but we are always happy to have the initial discussions with you and work closely with your solicitor to ensure the necessary legal documentation includes relevant provisions and fits with the family’s aims and objectives.

Wills, LPAs, and partnership/shareholders agreements can quickly become outdated, and it is vital that you review them regularly.

Should you have any concerns or wish to discuss your situation then please do give us a call.