Should I transfer assets in my lifetime or in my will?

Legal advice for farmers

Mon, 17 May, 2021 - 11:25

Time and time again, I am asked should I transfer assets in my lifetime to my children or leave them pass in my will?

There is no one-size-fits-all approach to succession, and to passing assets to the next generation. There is no right or wrong answer to this question, as it very much depends on a wide variety of factors, such as family circumstances, whether there is a child farming, the tax implications, the need for nursing home care, the ages of the parties or the needs of each child, special circumstances of a child, for example, gambling addiction, divorce, mental health issues etc.

There are advantages and disadvantages of leaving farmland in your will, as against a lifetime transfer, and the best decision for you and your family will be dependent on your own personal circumstances.

Advantages of transferring property in your will

You can change your will anytime before you die. A will only speaks from death. Therefore, during your lifetime you can make a will, revoke it and/or amend it as frequently as you wish, provided that you are of sound mind.
You have control over the asset for the rest of your life. You own the property until you die and can do with it as you wish.
There is only one tax involved, Capital Acquisitions Tax. There is no Stamp Duty or Capital Gains Tax upon a death.
If you decide to leave property pass in your will, that decision is only as good as you doing this. Talking about leaving property to someone in your will means nothing until a valid will is executed and the contents reflect your current wishes.

Disadvantages of transferring property in your will

Your successor may expect to receive the farm in your lifetime, and this may lead to bad feeling and low morale. He or she may lose interest and pursue other ventures and careers.
You will have to declare your farmland in any application for the Nursing Home Support Scheme, and this scheme will take into account the value of your farmland, when assessing your means and the contribution you must make towards nursing home costs.
You are responsible for the land up until your date of death, for example, insurance, maintaining it etc, unless you have a successor happy to work it until your death, or a tenant on the land.

Advantages of transferring property in your lifetime

You avoid probate, provided your remaining assets, upon death, are under a certain value, and you do not own any other real property.
The successor gets the benefit of the farm immediately and can grow the business. Motivation and interest are enhanced.
You will have fewer assets that are available to be taken into account in the event that you have to go into a nursing home, subject to the five-year ‘lookback rule’. However, a legislative amendment has now been approved by the Cabinet to put a three-year cap on the nursing home financial contributions of family-owned and operated farms or businesses. It will be debated in the Oireachtas shortly. It is proposed to apply where a family successor commits to working the farm or business.

Disadvantages of lifetime property transfer

There are three taxes involved — Stamp Duty, Capital Gains Tax and Capital Acquisitions Tax. However, there are various reliefs that may be claimed in relation to all of the said taxes.
You lose control over the asset. You have no say if the property is sold or mortgaged.
If the successor faces divorce proceedings or bankruptcy, the farm will form part of the assets that may be divided up or sold on a settlement or court order.
Once land is transferred, it is transferred. You cannot, for whatever reason, change your mind at a later stage and take it back.

Karen Walsh, from a farming background, is a solicitor practising in Walsh & Partners, Solicitors, 17, South Mall, Cork (021-4270200), and author of ‘Farming and the Law’. Walsh & Partners also specialises in personal injury claims, conveyancing, probate and family law.
Email: info@walshandpartners.ie Web: www.walshandpartners.ie