Planning and advice are needed for a smooth and effective farm succession process
Historically, farms passed to the successor, usually the eldest son, on the death of the farmer, with little or no advance planning.
Nowadays, it is widely acknowledged that greater emphasis on planning for the handover of the family farm to the next generation is vital, with a view to ensuring future viability and sustainability.
In addition, there are more conditions attached to the various tax reliefs than ever before.
Whilst every situation, family and farm is unique, in my experience, there are usually seven categories of people, aside from the two solicitors involved, that one should consult with, in order to implement an effective succession plan.
It is, usually beneficial to involve all your children in the transfer process, and certainly to communicate to all children the final plan for distribution and transfer of assets.
It can help to avoid disagreement, disappointment and resentment.
Both the transferor and successor will need time to find out how much it will cost him or her. The tax payable, if at all, depends on the circumstances of each case, and a detailed discussion is needed with your tax consultant/accountant in advance of any transfer taking place.
The three taxes to be considered when a farm is transferred during the lifetime of a farmer are as follows:
Create a list of all of your assets and debts so your tax consultant/accountant will have the full picture when you attend at the office to discuss the proposed transfer.
From the transferor’s point of view, once the farm is transferred, you will no longer be the owner of such a valuable asset.
Give yourself time to explore your options, and discuss these options with your tax consultant/accountant, to ensure you are comfortable for the rest of your life, after the transfer.
It is important to ascertain what needs to be done to transfer the farm entitlements to the successor on the transfer.
It is important from a tax perspective that the farm entitlements are transferred the same day as the farm.
If the farmlands or farmhouse is mortgaged in favour of a financial institution, you will need to procure its consent in writing to the proposed transfer.
It is important to meet with your relationship manager as soon as possible, as this process may take time.
Sometimes, a bank will insist on a new mortgage being taken out by the transferee.
For that reason, it is important to approach your bank at the earliest possible time.
Department of Social Protection
Farmers are self-employed, and they should establish their position with the Department of Social Protection in relation to their PRSI contributions and eligibility for the Contributory State Pension. Farmer’s wives, in particular, should also make enquiries to the Department of Social Protection.
Complicated social insurance scenarios can arise in farming situations.
The local social welfare office can provide detailed information on a person’s PRSI history, and entitlement to benefits as a result of PRSI contributions.
Once you have this information, your tax consultant/accountant can then assess the position.
You will need to get a valuations of the assets being transferred.
It is necessary and important to instruct an auctioneer who is experienced and knowledgeable in relation to the value of farm stock, basic payment entitlements and farm machinery.
Realistic valuation of assets should always be obtained.
If only part of a folio is being transferred, for example, if the family home is not being transferred with the farm, or the title is a Registry of Deeds title, a Land Registry-compliant map will need to be prepared by an engineer to attach to the Deed of Transfer.
Transferring the family farm may seem, a little overwhelming at first, but if you consult the right people to guide you through the process and obtain the best advice, the transition will be a great deal smoother and easier.
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