For most people, the question of retirement comes down to whether they can afford to stop working. With the help of a good financial adviser, expenditure in retirement can be forecast and the question of affordability can quickly become clear.
However, for farmers and farming families the question of retirement poses a unique and often complex set of questions.
First and foremost, are you ready to hang up your boots, and if so, who will continue the farm business? For anyone farming as a sole trader, can you face the idea of selling the farm and, if so, is the business in a saleable condition? If the next generation are already involved in the business, are they willing and able to take the reins?
These practical considerations must be viewed in the context of the farm business itself. For example, are the next generation formally involved in the business by way of a Partnership Agreement. If so, does the Agreement deal with the withdrawal of capital and is this achievable to enable the business to run as a going concern?
Then there is the question of the Farmhouse. On retirement, will this still be your home? If so, this can have implications on your death, as Agricultural Property Relief (‘APR’) may not be available on the value of the Farmhouse, which could in turn increase any Inheritance Tax payable by the estate. If you are to move out of the Farmhouse on retirement, where will you live and are you ready to make such a change?
With so many questions, the idea of retirement is often put on the backburner which continues to be a common theme within the farming industry.
However, this does raise problems of its own. For example, lack of mental capacity due to such illness as Dementia or Alzheimer’s disease can be catastrophic for the farming business.
For anyone farming as a sole trader, bank accounts will be inaccessible, leading to the inability to fulfil contracts, pay staff and could ultimately prevent anyone continuing to run the business. Even within a Partnership, a mentally incapacitated Partner can cause problems for the business, notwithstanding the impact which this can have on the individual and their family’s personal financial position.
Having a Lasting Power of Attorney for Financial Affairs is therefore very important, as this allows you to appoint someone to manage your financial affairs if you were ever unable to do this yourself. Having the right person appointed to deal with the farm business is essential, as this should enable the farm to continue to operate largely uninterrupted. If the incapacitated farmer is to continue to reside in the Farmhouse until their death, this can also ensure the availability of APR.
At Hay & Kilner, the expert lawyers in our Private Client team can advise farmers and farming families on matters of succession planning, Inheritance Tax planning, the preparation of Wills and Lasting Powers of Attorney and the Administration of Estates and Probate. Please contact Alison Hall, or call 0191 232 8345 for more information.