Shedding light on the key considerations of succession planning
Farm succession is something that meets every farm and you have to deal with it at some point in time.
This was a key message delivered by Martin Clarke, Partner and Commercial Manager with IFAC, who spoke at last week’s Teagasc National Sheep Conferences, held in Athlone and Donegal.
Discussing succession planning, he explained that its core is the “orderly and tax efficient transfer of assets or wealth”, and it encompasses both gifts and inheritances. The key elements to consider when developing a succession plan are legal effectiveness, tax efficiency and practicality, he said.
However, he noted that farmers need to consider the ‘forgotten issues’ when developing a succession plan. These include: the provision of income for oneself post transfer; the implications for income tax following the cessation of the farming business; the income of the successor and how this will be taxed if they are in off-farm employment; and how the Fair Deal Scheme will affect the assets if a lifetime transfer is not completed prior to its need for use arising.
The Succession Act and the importance of creating a will was also discussed, with Martin adding: “Having a will is very important for farmers because you own assets and in order to direct where they go, you must have a will if you are not dealing with a lifetime transfer.”
To take the complexity out of transfers, Martin centred his presentation on the reliefs available to minimise the tax and the cost to the farm, while protecting one’s own security.
The importance of communication during the succession planning process was also outlined, with the consideration of other family members playing in a key role in how the actions of a farm succession plan are implemented. This is not only important to ensure the smooth transfer of the asset, Martin explained, but also to minimise conflict in the future.
The IFAC representative also touched on the number of farm structures available that may come into play when developing a farm succession plan. These include sole trading; partnerships and limited companies.
In the below video, Martin joins Brid McClearn to give an overview of his presentation and to outline his take-home messages:
To access Martin’s full presentation from the Teagasc National Sheep Conference, click here.
Also read: Farm succession and inheritance planning
Also read: Have you a Will made?