Farm inheritance and succession disputes on the rise – Have you got a plan in place?

By Andrew Heskin, Partner and ARA specialist

 Law firms across the UK are reporting a rise in inheritance and succession disputes over farms and agricultural land in recent years.

Writing in Farming UK, Nazia Nawaz of Ramsdens Solicitors, said the growing number of legal cases involving inheritance and farms had highlighted the risk that families face where there isn’t a sufficient and documented succession plan in place.

He points to the often-informal agreements around the running of a farm and verbal agreements between different generations, siblings and children, where there is often an “unwritten expectation of some children of inheriting the family farm and/or business”.

There have been several high-profile cases in recent years, such as Habberfield v Habberfield, where a claimant won £1.2 million after a difficult and acrimonious legal battle.

She spent 30 years working on the family farm based on a promise from her father that it would be passed to her. After his death, she was challenged by her mother, who said that no such verbal agreement existed.

Eventually, the court ruled in her favour, finding that the agreement had existed and her mother had been notified.

However, in a twist, the court found that these promises had only been in relation to a dairy unit and not other farm activities that were managed by her brother.

The case was very complicated and hinged on many different factors but the entire dispute could have been avoided if documented plans had been put in place.

How should farming families prepare for succession?

Farms passed between different generations of a single family need to have some kind of plan in place, which includes a valid Will that spells out who should be a beneficiary of the farm and business.

If a current owner intends to retire or semi-retire before their death and pass part of the business on, they should also consider a farming partnership agreement.

This should deal with the ownership of the business and the assets it holds, including land and property, what happens if a partner retires, dies or becomes incapacitated, how partners are paid out if they leave the business and what should happen in the event of a dispute.

Creating these agreements will not entirely prevent a dispute but they should make them easier to manage and less costly.

Planning for succession could also help farmers to manage their Inheritance Tax bill by passing assets on to family members tax-free over time or identifying potential liabilities that need to be managed.

It is far easier to have a Will, agreements and a plan in place before a farm owners’ retirement or death. Whilst it can be awkward to have conversations about formalising verbal agreements, it could substantially reduce the potential for costly disputes.

If you would like to know how we could help you with your succession planning, please get in contact with us today.