Talk

Advanced search

Mumsnet has not checked the qualifications of anyone posting here. If you have any legal concerns we suggest you consult a solicitor.

Family business, personal debt and death.

(12 Posts)
PegEgg Tue 28-Mar-17 07:58:45

Hope someone can help me get my head around this.

My dad is a very private man. He has terminal cancer and is having to face up to and tell us about various monetary issues.

So dad has a family business. A farm. Was equal share holder with my mum until recently when the gave my brother one third. So each hold 33. %.

Farm has a massive mortgage.

Turns out dad also has 25 grand owing on personal credit cards. That we know of.

On his death (hideous) myself, mum and uncle become executors of the estate.

How do we deal with this. Will the business have to be sold in order to pay his personal debts ( though having said that I suspect assets would cover that) Can my mum sell the farm if my brothers disagrees? They have an uncomfortable relationship.

Feels like the calm before the storm at the moment!

prh47bridge Wed 29-Mar-17 08:16:59

From what you have said I am guessing that the business is a limited company.

The executors cannot sell the business. The estate will only own one third of it. They can sell that one third share if it has some value and the Articles of Association permit the sale but that is all.

If the assets in the estate are insufficient to pay off your father's personal debts some of the debtors will not get paid. They cannot force anyone else to pay unless someone has guaranteed his debts. The law sets out a strict order in which debts must be paid if the estate is insolvent.

Assuming the farm belongs to the business your mother cannot sell it. It is not hers to sell. Any decision to sell must be taken by the directors of the business. If your father leaves her enough shares to make her the majority shareholder she is likely to be in a position to force a sale but the minority shareholders may be able to bring a claim that the company is being managed in a way that is unfairly prejudicial to their interests.

DairyingLass Wed 29-Mar-17 08:23:19

It might not be a ltd company, just 3 partners.

You need sound business advice to sort this... from a land agent or the farms firm of solicitors.

Is your brother wanting to take on the farm? I imagine he is.

It maybe that the whole farm won't have to be sold, just a field or two... at £10k per acre not much may have to be sold at all.

PegEgg Wed 29-Mar-17 08:32:50

Thank you for replying. I don't think it is a limited company actually. Family partnership. Was just mum and dad. Now my brother is involved.

senua Wed 29-Mar-17 08:35:00

Get proper legal advice, it will be cheaper in the long run.

VivienneWestwoodsKnickers Wed 29-Mar-17 08:36:08

Speak to NFU, especially if the farm insurance is with them. There may legal cover on the policy, if they can point you to someone to discuss this web. Farms are often not protected behind Ltd companies and are all too often done as family agreements which can of course break down. Tradition is wonderful, but can be difficult if the family are not on the same page.

I wish you all the best OP.

PegEgg Wed 29-Mar-17 09:20:11

Thanks for the advice everyone. Yes brother wants to take over farm but his relationship with my parents is strained (bordering on abusive) and I am concerned about my mum after dad passes. I can't see how she can continue to live and work alongside my brother. It's a very sad and stressful situation.

DairyingLass Wed 29-Mar-17 09:38:10

Sorry that your family's going through this, and sadly it's far from uncommon with farming successions. I agree that you need proper legal advice. It might also be an idea for you or your brother to post this on The Farming Forum - plenty there have walked in your family's shoes.

PegEgg Wed 29-Mar-17 16:25:52

Thank you. Won't be getting my brother to post as he is the abusive one! I am concerned about my mum at this point. Will seek real life advice. Many thank everyone.

TheClacksAreDown Wed 29-Mar-17 16:29:13

If the transfer was a gift to the brother is In the last few years then most of the value of the gift from your father will form part of his estate. Only really an issue if he gets over the inheritance tax threshold after spousal transfers (assuming your parents are married) but another reason to get good real life professional help

PegEgg Wed 29-Mar-17 16:46:58

I just hope we can sort it all out without too much heartache but I suspect we can't. Feels like dads death will just be the beginning. Didn't think we would be in this situation a few years ago.

EnormousTiger Wed 29-Mar-17 21:01:22

You need to find out if it is a limited company - check eg any farm invoices or notepaper or a tax return - that should tell you.

If it is a partnership as you think how can your father who only owns half the partner give your brother a third and yet end up with a third still? That means he has purported to take some of your mother's half share away. Did she agere to that? Did she agree it in writing?

I think farms are free of inheritance tax but if not then it is better for the wife to inherit as no inheritance tax than for the brother.

Anyway let us assume your mother agreed and they each now own a third (and what about you?).
Do they have a written partnership agreement? Let us assume not. therefore the Partnership Act 1890 deals with things. I think it says every partnership is dissolved on death of a partner. So after the death your mother and brother may want to continue as a new partnership. If you brother has just got his share what about you? Perhaps your mother shoudl be making a new will leaving you the same as your brother has already had.

If there is very little value even in the land once the mortgage is concerned of course then this may not be worth bothering over. The personal debt of your father may be just in his personal name or it may be a partnership debt - again needs to be checked.

Best to see a solicitor if you can.

(The Clacks yes I would usually agree but I think farms have an IHT exemption so they may be in the clear with that gift even if the third of farm after debts falls over the iHT threshold)

Join the discussion

Join the discussion

Registering is free, easy, and means you can join in the discussion, get discounts, win prizes and lots more.

Register now