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Succession planning: Whose farm is it anyway?

31 Jan 2018

The recent case of Sargeant V Sargeant saw a widow, Mrs Sargeant, attempt to bring a claim for maintenance and dependence against her husband’s estate, 10 years after his death.

Mrs Sargeant’s late husband originally farmed in partnership with his brother and sister after the death of their parents. After the death of his brother, the late Mr Sargeant farmed in partnership with his wife and their daughter. During this time, when his Will was made, Mr Sargeant purportedly owned the land which the partnership farmed.

Under the terms of his Will, Mr Sargeant’s estate passed into a discretionary Trust, with the wish for Mrs Sargeant to benefit from the trust during her lifetime by way of an income.

It transpired after the late Mr Sargeant’s death that part of the farmland was an asset of the partnership and as such did not pass under the terms of his Will

When Mrs Sargeant’s income from the Trust began to fall in value, she claimed that she always believed that part of the farm was owned jointly by her and her husband. However, it was not until she found herself in financial difficulty that Mrs Sargeant realised she was mistaken and had never owned any of the land.

Whilst this case asked the Court whether such a claim could be made by Mr Sargeant so long after her husband’s death (which was in fact refused by the Court), it serves as a stark reminder to review the way in which the ownership of land is documented.

In a world of ever increasing diversification within the farming sector, much work is required with advisers to ensure farm businesses operate in a tax efficient way and that Inheritance Tax reliefs are available on death. As such, farm businesses can often have numerous documents purporting to record the ownership of the land, such as title deeds, Partnership Agreements and Farm Business Accounts.

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When dealing with such complex matters, the fundamental principle of legal ownership should not be overlook. With so many documents required to record ownership and business arrangements, they could all purport to record the ownership of land differently. Such differences will also affect the way in which the land can pass on death, and may pass as part of an asset of the Partnership or through the right of survivorship instead of under the terms of someone’s Will.

It is easy to see how such ambiguity can then cause uncertainty and discord between the family and those involved in the farming business on death.

This can often arise when people are added to the farm business, such as the introduction of the next generation. If you are considering bringing the younger generation into the farm business it is an ideal time to obtain advice to ensure this is correctly documented to reflect your intentions, and to carefully consider all repercussions.

It is also worthwhile for established farm businesses to review their exiting documentation to ensure it accurately reflects the intentions of all those involved in the farm business.

At Hay & Kilner our expert solicitors in our Rural Team have extensive experience in advising clients in all aspects of land and farm business ownership, and would be happy to assist in reviewing your current circumstances.

If you would like further information about any of the above, please contact Alison Hall, or telephone 0191 232 8345.