Succession is a complex topic, and each family is different and there is no one size fits all. Farm businesses, in particular should consider what will happen as it can affect all generations and the future of the business.
The Trust and Succession (Scotland) Act 2024 came into force on 30 April 2024, which makes changes to Trust Law and Intestate Succession, which is where the deceased did not have a Will. Perhaps a morbid topic, but one which should be considered by us all, succession applies in lifetime as much as beyond and it is our experience that farm businesses need to consider this even more as it can affect all generations.
A Will is just the starting point. If you are a partner in a farming partnership, then there are multiple documents you need to consider to provide for what happens after your death.
Even if your Will deals with what happens to your share in the farming partnership, does this coincide with what the Partnership Agreement itself says? You cannot necessarily choose who can succeed to your share in the partnership. You may wish to pass your share to the next generation, a son or daughter, who is already working in the farming business with you. How is that achieved with certainty?
We all know that farmers work well beyond the normal age of retirement, so is there merit in including the next generation in the farming partnership at an earlier stage during your lifetime and reducing your share as time goes on?
Planning is of more importance when partnerships span different lines of the family, such as siblings, to ensure each branch of the family benefits to the extent you would wish. If a sibling dies, their family can be cut from the business inadvertently.
There must be careful management of winding up the deceased’s estate and the contractual provisions of the Partnership Agreement. Often the Partnership Agreement provides that the other partners can buy, either individually or together, the share of the deceased partner, and this can conflict with the Will, where that partner may have bequeathed his share to one or more of his children.
Even if you have a Will, your spouse and children can choose to claim “legal rights”, which is a share of your moveable estate. A simple reading of this would lead you to believe this means everything except property (with property usually being most valuable), however, property which is classed “partnership property” is often deemed to be moveable, unless provided otherwise (also an untested point). Legal rights could extend to a share of the value in the whole farm, including the farmhouse. What if the farmhouse is your home? Your spouse or co-habitant may not be entitled to stay in their home if that is the farmhouse and partnership property. Whilst families often resolve this amicably and agree a way forward, this is unfortunately not always the case, and there can be a need to sell parts of the farm to meet these claims.
The 2024 Act changes to who will benefit from the remainder of the deceased’s estate, if there is no Will, after the spouse and children have been allocated their entitlement. If you do not have a Will, there can be lots of situations where the division of the estate is complicated, and the Estate distributed in a way you would not have wished. An example would be if there are children and a surviving spouse, but the spouse is not parent to those children, but there can be many other complicated situations.
Marriage and children are not the only relationships to be considered. The Family Law (Scotland) Act 2006 amended by the 2024 Act, provides for 12 months for a cohabitant to make a claim on a deceased’s intestate estate. Their potential rights could be akin to that of a spouse. We are in a day and age where there is often no longer a traditional family of mum, dad and 2.4 children, and you should ensure that your family is protected to the extent you wish.
Not all farming partnerships own their farm, and the Agricultural Holdings Legislation deals with leased holdings and I only mention briefly here. You can bequeath your tenancy in your Will to one person and there is a very short 21 day-time limit from the date of death to notify the landlord, not perhaps the first thing to consider at that time. Intestate succession is a bit more generous with the period of a year being provided to complete the transfer of the lease, but in this time the tenancy interest will need to be valued and included as part of the Confirmation of the deceased’s estate.
Ultimately, succession is a complex topic, and each family is different and there is no one size fits all. It is one to think about at all stages of life, and regular reviews of your Wills, Partnership Agreements, title deeds and the intentions of all involved in your business is advisable.
Contact our Rural - Land & Business team or our Private Client team for advice relevant to your specific situation and they will be happy to help.
