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Safeguard your rural family business

Published: 26 November 2019
Time to read: 2 mins

Mr and Mrs Farmer farm in partnership with their adult daughter, Anne.  They have given careful thought as to how to deal with the farm after their deaths, and, have recently updated their Wills to leave the farm to Anne, or, if she has died before them, to a trust for their young grandchildren with a Letter of Wishes indicating that the farm should pass to whichever grandchild(ren) shows an interest in carrying on the farm.  Further, as part of a succession planning exercise, they have just transferred a share of the farmland to Anne. The Farmers are feeling rather smug about having their affairs so well ordered.

Anne unexpectedly dies, leaving behind a husband (Jim) and two children, aged 16 and 12.  Other than her house, the share of the land and her partnership interest, Anne had very few assets.

Anne had not been as organised as her parents and had never gotten around to drawing up her Will.

After some inevitable delay Jim is appointed by the Court as Anne’s Executor.  The Farmers have never particularly liked Jim and are finding his involvement, as Anne’s Executor, wearisome.

Without a Will, the division of Anne’s estate is regulated by the Succession (Scotland) Act 1964.  In terms of which, Jim receives the house and is entitled to a cash sum.  As Anne had very little cash this will need to be paid from her partnership share.  The Farmers have to take out additional borrowing to pay Jim his entitlement.

They are horrified to discover that they will jointly own the farmland with their grandchildren.  Their elder grandchild wants to sell his share to pay for a round the world trip.  They cannot afford to buy their grandchildren out, and, reluctantly, they put the farm up for sale.

Many of these issues might have been avoided if Anne had put a Will in place. A trust in Anne’s Will could have protected her farming interests for the longer term benefit of her children, and appointed Trustees to manage them on the children’s behalf until they reached financial maturity.

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