Succession planning is a process to plan for the transfer of knowledge, skills, labour, management, control and ownership of the farm business between one generation and the next or successor generation. Succession is a process and not an event; it takes time and effort to work through and develop a comprehensive plan that best meets the needs of the farm family.
Tough questions have to be asked. Is there a potential successor? If yes, does he or she have the skills, abilities, knowledge and desire to successfully operate the farm business? If there is no successor, what are the options? Is selling part or all of the farm assets an option? How long does the current operator(s) want to continue running the business? Only the individual(s) involved can answer these questions.
Planning the transfer of the family farm to the next generation can be a difficult task, but it is important to make preparations early to avoid potential problems before they arise. The majority of farm families do not plan adequately for succession, so farmers and potential successors are encouraged to be informed.
Information on Succession Planning
- Farm succession & transfer guide (Teagasc)
- A guide to transferring the family farm (Teagasc)
- Components of a Farm Succession Plan
- Farm Succession Dos and Don’ts
- Farm Succession Planning Checklist
Tax incentive for Lifetime Farm Transfer Partnership
In Budget 2016 a ‘Family Transfer Partnership’ tax mechanism was introduced which aims to promote farm family succession. This measure is not yet in operation and is subject to EU approval under State Aid rules.
This mechanism was devised in line with IFA proposals and will allow that where family members enter into a partnership arrangement with an appropriate profit-sharing arrangement that provides for the provision of family farm transfer to the younger farmer at the end of a specified period (not exceeding ten years) a tax credit up to a maximum of €5,000 per year for five years, can be allocated to the partnership, thereby incentivising the transfer and mitigating some of the financial concerns.
Making a will
It is important to make a will to ensure that proper arrangements are made for your dependants and that your property is distributed in the way you wish after you die, subject to certain rights of spouses/civil partners and children.
It is possible to draw up a will yourself or you can hire a solicitor to help you. There are legal requirements and if they any of them are not met, the will is not valid.
In general, you are free to dispose of your belongings or estate as you wish, but your will is subject to certain rights of spouses/civil partners and other more limited rights of children.
Rights of a spouse or civil partner
If you have left a will, and your spouse/civil partner has never renounced or given up his/her rights to your estate, and is not “unworthy to succeed” in legal terms, then that spouse/civil partner is entitled to what is called a “legal right share” of your estate.
This legal right share is:
- One-half of your estate if you do not have children
- One-third of your estate if you do have children
Rights of children under a will
Unlike a spouse/civil partner, children do not have any absolute right to inherit their parent’s estate if the parent has made a will. Children born inside or outside marriage and adopted children all have the same rights and there are no age restrictions.
However, a child may make an application to court if he/she feels that he/she has not been adequately provided for.
The family/shared home
The surviving spouse/civil partner may require that the family/shared home be given to him/her in satisfaction of his/her legal right share, although if the house is worth more than the legal right share, the spouse/civil partner may have to pay the difference into the deceased’s estate. A court may decide that this sum does not have to be paid if it would cause undue hardship to the spouse/civil partner or dependent children.