Unfortunately a client died recently and at a young age.  This has brought into sharp focus several major issues.  There was a will, which dealt with asset dispersals correctly and as the farmer wished it to, but what was not thought about adequately was the way the beneficiaries would view it.  None of the family knew what was going to happen and had been farming in the dark for years.  Yet they had to keep the business going in difficult circumstances.  The will when it was read out, was too early for people to get to grips with and the legal language was misunderstood along with the reasons why things were done as they were (from tax angles).  This all led to avoidable minor fallings out within the family and additional angst when none was needed while the grieving was being dealt with.  Over the subsequent six months all has been sorted out and peace reigns again with everybody satisfied as to where they stand.

Arising from this several important points arise which may be relevant to other families and businesses.  Firstly, all people should have a will and at its most basic one should put a “holding will” in place while a more thoughtful one is drawn up.  If you die without a will (intestate) then a set of rules take over and divide things up in a prescribed manner which may not achieve what you desire.  Wills need to be updated on a regular basis every five to ten years as circumstances alter.  Values of property have moved dramatically in the last decade and in many cases children will have grown up and left home.  Even a minor stake in a family partnership can amount to a lot of money.  The second major point to make, is that it pays to let people know the basic thinking and gist of a will while alive.  In reality there is a strong argument that the wills should be shown to people whom it is going to have a major impact on so that they can plan effectively as well.  It will not be secret forever.

After a death, it is also important to note that if an original partnership consisted of only two parties, then it automatically ceases and becomes a sole trader.  Consequently, all bank accounts are frozen until things are sorted out.  Where a partnership agreement is in place and there are more than two partners, then the agreement can state how the original partnership will proceed.  Where this is in place, accounts are not automatically frozen.  It is however worth thinking about who has the right to sign cheques and make payments?  It pays to have thought about all these issues and let other relevant people know where things are kept, such as legal documents, copies of wills, cheque books and other important passwords etc.   It will also be sensible to have a list of investments, insurance policies and important people to contact in the case of having to move the business forwards unexpectedly.  Some of this could be placed in a sealed envelope to be opened when circumstances require it, but much better to be open about things at all times!

Having wills, partnership agreements and being open about the running of a business, while requiring trust on everybody’s behalf is essential to the smooth handling of the transition.  There will be enough family issues to deal with without throwing in additional turmoil.  Don’t ignore this very important part of succession planning.  People spend a lifetime building up a business and then don’t adequately plan for its successful continuation or succession after their death.

Speak with your solicitor, accountant or contact Ian at ianbrowne@fcgagric.com or your local FCG office to proactively help you put an effective succession plan in place to protect your business and family.