Farming and Law: James Skellorn of Barker Gotelee on succession planning
“I HAVE had a look at the will. It says something about a trust. I can’t understand it at all.”
What have those lawyers done now? Why make a flexible will? Succession planning is urged upon us.
Ideally, there will be many years when you work with your children and then progressively hand over to them control and responsibility for the farm or the business.
However, before that there is a period when the children are too young for you to know which if any of them will come into the business.
Nonetheless your will needs to deal adequately with the family and the business. An obvious choice would be to divide it equally between the children if they are all too young to be involved.
They would not get access to capital until they were of an age to be able to cope with it, but they would each get an equal share.
Although this is fair between the children, it does mean that if one of them takes on the farm, he or she will have to deal with his siblings over many years and possibly spend much of his or her working life paying them out for their share of the farm.
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Dividing the farm between your children also makes more likely the ultimate sale of the farm if each branch of the family goes in a different direction.
It is at this point when it is too early to say which of the children will be involved in the farm that a flexible trust can help.
The way it works is that the business is held in trust from which your widow or widower and your children and grandchildren can benefit.
Nobody is entitled to a fixed share. Instead, you name a group of trustees who decide ultimately who is to get what.
If you die before it is clear who will be involved in the business, the trustees can help to keep the business running and wait until it is clear whether one or more of the children is going to farm.
They can then work out how best to transfer the farm and the business to ones who are involved in it and how the others should benefit.
The trustees will have to make controversial decisions and the choice of trustees is absolutely crucial. They must have good knowledge of the family, of farming and sound business and financial knowledge.
Until you know the direction the children are going to take in life, a flexible Will can be the best way to give the next generation a fair chance to continue the business through to the next generation and beyond.