Ask a solicitor: Can we have 'our day in the house'?

Is it possible to transfer the farm while also protecting myself, asks this week's question.

In many cases, the farmer may wish to transfer the family home at the same time as the farm and retain a Right of Residence in the property for his or her lifetime.

Dear Karen,

I would like to transfer the family farm, which has been in my family for generations, to my son, who is farming at home with me. 

I am conscious of the fact that we will be giving him a very valuable asset which generates an income, and I would like to provide some protection for myself and my wife as we are getting older. 

I'll admit I like to hold on to the reins and find it hard to think about handing over control. Can I pass the asset to the next generation while also providing protection for my wife and myself?

Dear Reader,

The transfer of ownership of property from one generation to the next can be one of the most problematic phases in any business operation and is especially in the case of farms that are family owned and run. A farm is more likely than any other farm business to be transferred from one generation to the next.

First of all, you do not have to transfer anything if you are not happy to do so. No one should be putting you under pressure to transfer any asset to them. 

One major concern for the older generation is that of their welfare and security after they have retired or after they have transferred all or some of their assets. 

The great majority of farmers will feel that having worked on the farm all their lives, that they have a right to expect some form of income from it after they retire. 

Good, advanced planning will ensure that timely and appropriate steps are taken to provide a nest egg for the future, such as a pension or retirement plan. In the absence of such a pension or plan, it may be necessary to secure an income from the farm.

Obviously, every family has a unique set of circumstances, and each farmer will obviously want to do what is best for his children and for himself and his spouse. It is particularly important to ensure in so far as is possible that the farmer who is considering the transfer of the farm, will be emotionally and financially secure following such transfer.

Each farmer must ask themselves if they are emotionally ready to transfer the farm and let go of ownership and control. This can be difficult, especially if you have been the sole decision-maker for many years and will be leaving it to someone else to take control of the reins. 

The farmer must acknowledge the reality of retirement and all that it entails. Among the questions that they must ask themselves is whether of not they have a retirement plan to provide an income during their retirement.

Probably the most important issue to be faced is the financial security of the farm after the farm has been transferred. Another key issue is whether or not the family home should be transferred at the same time as the farm or, alternatively, be retained and then dealt with under a valid Will, which would take effect upon death.

In many cases, the farmer may wish to transfer the family home at the same time as the farm and retain a Right of Residence in the property for his or her lifetime.

A Right of Residence is a right to reside in the property and normally extends to the entirety of the dwelling, although historically, in older transfers or Wills, provisions are made for a right to reside in a room or a portion of the dwellinghouse only.

Some farmers wish to retain building sites or valuable pieces of land which can be sold in the short term or later or might possibly use as a means to providing gifts to other children. 

Some sites may need to be marked out by an engineer in advance of the transfer in order to clearly identify them and avoid disputes or difficulties at a later date.

Some farmers may wish to include in the deed of transfer a proviso that the recipient will pay a certain amount of monies over an agreed number of years in consideration of the gift in order to provide an income. 

Some farmers may also wish to include a covenant in the deed of transfer that a certain number of monies will be paid by the recipient to other members of the family within a stated time.

Others may wish to enter into a farm partnership agreement prior to the transfer to the successor so they continue working the land and obtain an income from the land. 

Many deeds of transfer will also include a reservation of a right of support and maintenance in favour of the farmer and his or her spouse for their respective lives.

However, whilst this provides some security for the older generation, it may complicate matters for the transferee if he or she needs to use the assets as collateral for a loan in the future.

While it is important for any transfer to ensure that he or she is financially secure after the farm has been transferred, it is equally important not to excessively burden the successor, he or she needs to earn a livelihood to support his or her own family and must be given scope to grow the business. It is very much a balancing act.