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inheritance / family business(11 Posts)
We have a problem on the horizon and after talking with DP yesterday he agreed that maybe we should ask on here to get some pointers before we broach this with a solicitor/his parents
We have a family farm. For some long ago complicated reason to do with DP's grandfather it was set up as a limited company, so that effectively the 'farm' owns everything including the house that DP's parents live in. Over the years various shares have moved about and different roles have been played (it is VERY difficult to get accurate info out of the parents) but it would seem that the current situation is that DP's parents are directors, his mother is the secretary, and DP is a director. There is a sister in scotland who has ME who has some 'sleeping partner' type shares.
The farm itself hasnt made any profit worth mentioning since DPs parents did this sort of half retiring/half not retiring (who knows) thing a fair few years back. There is a holiday cottage which just about covers the mortgage on itself and is a constant source of worry to DPs mum. There is a whole mess of problems associated with water supply and road maintanance to other properties on the farm land which I think I am getting to grips with. There is no actual 'farming' done by DPs parents - any arable or anmals belong to others who rent land.
about 3 years ago DP and I started to take over some responsibilities of the farm. We enrolled in some subsidised conservation projects and after a lengthy planning process we opened a glampy campsite which is set to bring in a fair amount. This has provided a reasonable source of income and provided a potential for more stuff.
DP's dad had a hobby that he was involved with on the farm but a seperate enterprise, which also provided an income over the winter. His partner in this has just pulled out which has left him adrift as he is too old to do it by himself and he has an unfortunate attitude which has probably alienated people who may have helped him.
DPs parents are not business minded. Not at all. They tend to live for this afternoon and they have sadly let every asset with potential go at the cheapest price ever. This is galling but there is nothing we can do about the past but it does highlight concerns for the future.
DP works full time in seperate employment but also works nearly full time on the farm as well, investing time and money with taking the farm forward in a profitable way for the future. I work more than full time in the summer, and pt in the winter. So far we have not taken an income due to reinvestment into the business but our business plan is running better than we predicted for our enterprises on the farm.
So thats the background. We have a few worries or things we might like to try to do but dont reall know how. DPs parents live in the farmhouse but its owned by the farm. They have very low pensions but they dont seem to be able to qualify for any pension credits because they are directors/have shares in the farm. MIL has a degenerative disease which is progressing. She could get financial help but for the directorship which doesnt pay them any money. Is there any way of them 'retiring' their directorships so that they effectively pass the company onto the next generation. This would free them up to apply for the low income benefits that they would qualify for, and possibly reduce their stress as they could stop being concerned about running the farm ineffectively.
also we are aware that MIL is getting worse in her condition and we dont know what might happen if she needs medical help or eventually to go into a nursing home (I would imagine she will try to access stuff at home as long as possible) - will this have an impact on the business if the company owns the house/farm/etc or is it likely that the business will have to be sold to pay for her/FIL care as they get older?
also they have set up some kind of trust for the farm to go into as part of their wills. this has something to do with inheritance tax and something to do to protect SIL as she lives on incapacity benefit due to her ME/Bipolar. Can the whole farm be transferred into the trust prior to their deaths? would that be a move that could be done.
DP is very worried. he is concerned that he is working like a dog for nothing, or that his parents wont/cant do anything to protect the business. If a proposal would make life easier give them more living day to day money and allow them to stay in the house then I think they would jump but as we dont even really know what why and where we dont know what information to ask for what suggestions to make. any advice would be gratefully recieved so that at least we know what direction we need to be taking conversations.
I think your case is far too complex for a message board to be helpful. But maybe you should print out what you've written and take it with you to a lawyer. Seems like a good summary.
But so mumsnetty - had to laugh at FILs unfortunate attitude
You need a solicitor (STEP member) and financial adviser (Chartered Financial Planner) to work together with you on this.
What you would like to do, in terms of moving shares and directorships is easily possible.
However, the financial implications of the parents making a transfer whilst still retaining benefit of the house that they live in needs to be carefully explored, as the house may eventually become liable to both IHT and CGT.
You also need to consider if there are various IHT exemptions that the farm could benefit from (Agricultural Property Relief, or Business Property Relief).
Speak to the NFU they should be able to point you in the direction of a solicitor that specialising in this area.
They may ne able to get attendance allowance if the mil needs help with her daily life. That is not means tested.
Nettle I am a STEP qualified lawyer who specialises in IHT planning for the agricultural community. If you want any more assistance just PM me and I can help.
In the first instance you need to know who owns the shares in the company and who the directors are. You can get this info from the Companies House website for about £4. You also need a copy of the most recent company accounts - either ask the family accountant for a copy or again get them off the Companies House website.
If the land is registered then you can get office copies confirming exactly who owns what from the Land Registry website ( again about £4). If the land is not registered then you wil need to locate the title deeds which may be held with the family solicitor, the bank or by the PILs.
It worries me that you and your husband are investing so much time and effort into a business that ultimately you may not benefit from becuase it is being left to a trust. It sounds as though the wills could be out of date as there has been a significant change to IHT law since 2009 which may mean new wills are in order.
There is certainly plenty that can be done to help them claim all the benefits they are entitled to. The fact of them being company directors alone should not preclude their right to benefits especially if they are not drawing a salary or dividends.
You summary is excellent and there is plenty that can be done to help your PILs, your family and your SIL.
This sounds like an utter utter mess but not at all uncommon to find with family farms.
I come from a farming background and disengaged from my father's farming business years and years ago for this very reason.
I totally agree with brainonastick on the legal and tax issues.
On the personal side I think your DH should stop working on the farm as he is effectively facilitaing his parents not dealing with the issues.
In my view the whole farm needs to be sold, debts paid off, parents bought a small manageable house to live in and new Wills written. That would separate the personal form the financial issues and everyone can get on with their lives. The farm sounds like it might have bene put in an A&M Trust but cant be sure. You really need very good legal tax advice form a specialist STEPS lawyer who knows how to deal with farm estates. Not just any old high street solicitor.
I do not underestimate how hard this will be for your DH. Telling my father I didnt want to be a farmer hurt him and my mother told me that. He eventually gave up himself some 20 years later but if I had carried on working on the farm he would still be there just like your PILs are holding all the financial strings and living in the farmhouse.
MrAnchovy sorry about crossed posts - had put in legal and then thought it might be more suited to here but I am reading both.
Shares seem to be divided between MIL and FIL. I think DP has some and I think SIL has some which DP referred to as 'grade B' shares????
DP seems to think that the shares are sorted in a way that no one person alone can outvote the others however I am not entirely sure that he might be being confused with being a director and it could be that he has no shares at all. Getting a copy of last years accounts shouldnt be a problem. I have a meeting myself with the accountant some time next week for a seperate matter.
DP does want to carry on farming - we are investing alot of time in doing stuff to bring in money to stop them just selling off great chunks of it when they want more cash. He wants to be able to pass it on to our son and for it to be viable in size when he does so. He has recognised the need to diversify in order to maintain the land until a time when farming itself may be profitable again. Plus he is very keen on the wildlife and conservation which we are lucky enough to be able to have and to make the most of through various government schemes.
The land is registered to the farm, and then DP rents a further 30 acres as the landowner refused to rent to FIL due to aforementioned attitude! FIL gets SPS, and DP has signed the current Higher Level Stewardship agreement which we manage.
MIL does get attendance allowance- I sorted that out about 3 years ago for her. We are at a loss as to where they are spending their money. I raised concerns last year because although they claim to not take any money from the farm, the year accounts (which I saw earlier this year as was doing all the paperwork for a grant for the campsite and had to submit them) seemed to indicate they may have taken about 10 grand...... its probably a selection of running stuff through the farm and awful book-keeping - from what I have witnessed it seems to be a hotchpotch madness of financial fire fighting and not really knowing the value of things (such as the mess with the water) plus being frankly, far too old and not with it enough to be able or want to keep on top of it all. FIL has his head in the sand most of the time and doesnt seem to want to know so long as he is left alone to shoot stuff. MIL worries constantly and juggles desperately. I run the account that does the HLS and the campsite but there is the rogue main account which I have only spurious control over......
Completely familiar situation. Also complicated by the emotional dimension, which means that your parents in law may not be able to take a realistic view and 'let go' of their directorships, since that will also mean letting go of the farm - which if it's anything like my parents in law, is not just a business but a massive part of their identity and life.
You need specialist advice as others hAve said - a STEP qualified lawyer, tax specialist etc, who are used to dealing with the agricultural community and deal with these things all the time. We actually used a land agent to help us negotiate the division of assets when my parents in law retired. The NFU are the best people to contact.
Good luck. And remember that at the end of the day relationships count for more, really. They can be tricky waters to navigate, ime - a gradual process, which brought PIL along with us, which was facilitated by a neutral negotiator and which allowed them to make their own choices under specialist advice, worked best for us.
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