Legal Issues – A Guide to Transferring the Family Farm

James McDonnell

The First Step in a Succession Plan

Making your Will is a quite a significant legal task to undertake. This legal document sets out how you wish your assets to be shared out on your death. It is a document that is often thought of too lightly, the comment ‘anybody can write a will’ comes to mind, but if completed incorrectly can have dire consequences for those left behind. When you die your affairs need to be settled up. There are likely to be bills that need to be paid and property to be distributed. A Will is the simple mechanism that allows you to decide what happens to your assets with a minimum fuss and delay.

For too many people this task remains only an intention and never takes place. One reason for this might be that you keep putting off ‘the family meeting’ and deciding where you would like your assets to go. But if you don’t make a will then you have no say where your assets go after your death. This uncompleted task then becomes the ‘decision’. If you die without making a Will then what happens your assets will be determined by law (Intestate).

The 1965 Succession Act is the relevant legislation that now decides on how your assets are distributed. Irrespective of your age, state of health or financial status, it is imperative that you have a legally recognised valid will.

The advantages of making a will:

• It protects and provides for your loved ones. It will also prevent unnecessary distress and expense on your relations which can occur where there is no will.
• It allows a parent(s) appoint a guardian(s) for their child(ren) and long-term dependants
• It gives legal status to what you intend to do with your assets or possessions
• Once the task is completed, you may feel like you have removed a burden or worry from your mind.

Making a Valid Will

Making a Will could be straightforward, but it can be more complicated than you realise. It is important that you consult a solicitor who can guide and advise you through the confidential process of making a will for the benefit of your loved ones, while providing the assurance that what you have written is legal and valid.

For a will to be valid in Ireland, the testator (person making the will) must:

• Be aged 18 or over (or be – or have been – married)
• Act of his own free will and
• Be of sound mind, memory and understanding
• The testator must know the nature and extent of his/her property and be capable of recalling all of the people who may expect to benefit from his/her estate
• The will must be in writing
• The document must be signed at the end by the testator (or by someone in his presence and by his direction)
• The signature must be written or acknowledged in the presence of two witnesses, both present at the same time and
• The witnesses must sign in the presence of the testator, but not necessarily in each other’s presence
• A witness or his/her spouse cannot benefit under the will.

A will should contain:

• The testator’s name and address
• A revocation clause
• A clause appointing at least one (but preferably two or more) executors
• A list of legacies (gifts of money or goods)
• A list of devises (gifts of real property)
• A residuary clause, disposing of the remainder of the estate
• The date
• The testator’s signature and
• The attestation clause or testimonium

Where these guidelines are not followed, the will may fail and if this happens the law in relation to intestacy will determine how the assets are distributed.

Intestacy

When a person dies and there is either an invalid or no will, the person is said to have died intestate. The persons assets are then distributed as per the laws of intestacy as laid down in the Succession Act 1965. If some of the beneficiaries have predeceased the testator their children may be entitled to a share in the estate.

A deceased dies totally intestate if:

• He/she has made no will;
• He/she has made an invalid will;
• He/she has revoked a will; or
• He/she had made a will which does not dispose of all his property

Table 1: Example of how an estate is distributed on intestacy

Probate

Probate is the legal process that allows the deceased persons estate to be distributed. This is carried out by a person named in the will (executor), but first the will (if there is one) has to be declared valid. The Probate Office has the authority to decide on what type of grant is given. Grant of probate is given to the executors by the Probate Office. They must follow the instructions of the will. The executor must first ‘prove’ the will to establish its validity, prior to following its instructions. Letters of administration are granted if the deceased person dies without a valid will. This is usually granted to a close relative of the deceased. This person then becomes the Administrator of the estate. Letters of administration with the Will annexed can be applied for if a person applying for probate is someone other than the executor. This can happen if the executor has died or none was appointed. It is usual for a recipient of the residue of the Will to make this type of application.

Department of Agriculture’s Inheritance Enquiry Unit (IEU)

This is a facility put in place by the Department of Agriculture, Food and the Marine (DAFM) to help the representative of the deceased to administer the estate in relation to any scheme or programme that the deceased was involved in. The IEU will liaise with the various sections of the DAFM to make administration of the deceased estate as streamlined as possible.

Following the death of a farmer there are generally two issues to be dealt with as follows:

1. A change to the registration details of the herdnumber/herdkeeper
2. Payment of any outstanding monies due to the estate of the deceased and the transfer of any CAP entitlements held by the deceased.

Changing the Registration of the Herd Number

When the Regional Veterinary Office is notified of the death of the farmer it:

• Records the death of the farmer on the Department’s systems
• Commences the process of herd transfer details and subsequently changes the registration details of the herdowner
• Where appropriate, arranges for the registration of a ‘herdkeeper’ with responsibility for the management and care of livestock in the herd

Payment of Outstanding Payments and/or the Transfer of Payment Entitlements held by the Deceased

There may be outstanding payments due to the estate of the deceased under various schemes. The deceased may have also owned CAP entitlements. The function of the Inheritance Enquiry Unit is to ensure the payment of any outstanding money due to the estate of the deceased and, where appropriate, to advise on the transfer of any CAP entitlements held by the deceased.

As soon as practicable, the executor/administrator of the estate of the deceased farmer and/or the solicitor dealing with the administration of the estate should contact:

Inheritance Enquiry Unit, Department of Agriculture, Food and the Marine, Eircom Building, Knockmay Road, Portlaoise, Co Laois. Tel: 057 8689995 | Email: inheritance@agriculture.gov.ie

Power of Attorney

Under Irish law there are two types of power of attorney. These legal instruments may be useful in certain circumstances. A power of attorney is a legal document that gives one person (the attorney) the right to act in another person’s place (donor) in general or for a specific purpose. This agreement ends when the donor dies or becomes mentally incapacitated.

Enduring power of attorney is a legal document where the donor states that the attorney will have the power to act in their place if the donor becomes mentally incapable or unable of looking after their own interests. It ends on death of the donor or if the donor revokes the document.

Enduring power of attorney (EPA) is a useful tool that can be part of a succession plan. You could use it to appoint someone to look after your affairs should you become mentally incapacitated, for example as a result of a disease (Alzheimer’s or dementia) or brain damage as result of an accident. It also allows you to avoid becoming a “Ward of Court” so essentially you get to decide who will control your affairs.

It is important to note that using an EPA is a giving another person substantial control of your affairs. EPA’s should be set up carefully with expert legal help especially in relation to the conditions and restrictions.

Advanced Healthcare Directive (Living Will)

Advanced Healthcare Directive is also known as a ‘living will’. This is a statement declaring how you would like to be cared for in the future on the assumption that you may not be able to make these decisions for yourself at the relevant time. The statement is limited to decisions around medical and surgical treatment.

In Ireland, a new law has been passed which maximises a person’s right to make their own decisions, with legally recognised supports, whenever possible. The Assisted Decision Making (Capacity) Act 2015 was signed into law on the 30^th December 2015. This Act applies to everyone and is relevant to all health and social care services. The Act is about supporting decision-making and maximising a person’s capacity to make decisions. As part of the Act, The Decision Support Service has been set up to support its introduction and to help use it. Think Ahead and The Irish Hospice Foundation are two organisations that can help people set up Advanced Healthcare Plans.

Ward of Court

When it is thought that a person is incapable of making decisions on their welfare and the management of their assets for their own benefit due to mental incapacity an application can be made to the courts for this person to become a Ward of Court. This means then that a committee is appointed to control the assets of the person (ward) for their own benefit. This process involves satisfying the court that the person is of unsound mind and incapable of managing their own affairs. The office of the wards of courts is responsible for administration of this procedure. A booklet produced by the courts service can be downloaded from the Courts Service website.

The Nursing Home Support (Fair Deal Scheme)

The decision to enter a nursing home is never taken lightly, but sometimes becomes the only option as it may not be possible for your family to provide the care that you require in your home for a variety of reasons and circumstances. The cost of care in a nursing home can be a substantial cost and your business or the business you passed to your successors might not have the cash flow to pay for this care.

It is often said that farmers are wealthy (own a large amount of assets) but have poor cash flow. The fair deal scheme is designed to aid in this situation. In essence, you will make a contribution towards the cost of your care and the State will pay the balance. This applies whether the nursing home is public, private or voluntary. The HSE administer the fair deal scheme. As part of the application process, your means are assessed to figure out how much state support you require. This assessment looks at two elements.

• Charge on income (80% of assessable income)
• Charge on Assets (7.5% of value of Asset)
• 40% of any rental income you receive for your home (principal residence)

These limits are capped at the percentages outlined above on an annual basis, and you will never be charged more than that cost of care.

Other elements of the scheme include:

• Savings disregard of €36,000/ €72,000 (single/couple)
• Transfers of assets in previous 5 years look back
• Asset charge limit on certain assets are limited to 3 years (22.5%)
• You must apply if you want your farm or business to be included in the 3-year cap. And to be successful you must meet very specific conditions.

There is also a Nursing home loan that can be used as an ancillary measure. As your assets form part of the assessment and your contribution is calculated based on your assets, this contribution may be deferred until after your death so that you do not have to find the money to pay this contribution during your lifetime. Instead, if approved, the HSE will pay the money to the nursing home on your behalf and it will be collected after your death. This is an optional benefit of the scheme. It is effectively a loan advanced by the State which can be repaid at any time but will ultimately fall due for repayment upon your death. This is known as the Nursing Home Loan. Further information on this scheme is available on the HSE website.

Personal Affairs Checklist

Putting your affairs in order is a tedious task. There are an awful lot of things to consider. The process of writing a will and the decisions around it are important to us as we try to make sure our estate goes to where we want. As part of putting our affairs in order it is important to have a list of all of the items and information that is important to us in a safe place. The family that you leave behind when your death takes place will need to get access to a lot of different types of information so that your wishes can be carried out.

In general, it might be obvious to the successor who the family solicitor and accountant are, but do they know where you have kept the family heirloom?

The Institute of Chartered Accountants in Ireland produced a Personal Affairs Checklist to help you bring all your information together. The checklist contains all your relevant personal information:

• Bank account details,
• A list of advisors like your solicitor, accountant and clergyman;
• Details of where your will is placed as well as who wrote it up and the executors;
• Your grave plot as well as any funeral arrangements that you have made;
• Your insurance policies and properties you might have; any assets you might have in your house or in safe keeping;
• List of safety deposit boxes;
• Societies or any other associations you might be a part of as well as any directorships you might hold;
• Details of your employment; where vital documentation is held, like your marriage or birth certificate, along with an array of other information that will be valuable to your family in friends if you should pass unexpectedly.

You should fill in all the details and tell someone that you trust where this item is kept (ideally the executor of your will).

This checklist should be kept in a safe place as it could be used to steal your identity. The person who knows about the checklist should have easy access to the document in case there are wishes in it relating to your funeral. You should review this document form time to time as some of the information may change.

A copy of a personal affairs checklist can be downloaded here.

The above is Chapter three from A Guide to Transferring the Family Farm. This booklet provides essential information on taxes, legal issues, collaborative farming options, pensions and education issues relating to farm transfer.

Download a copy of A Guide to Transferring the Family Farm