Farm Ireland

Tuesday 28 March 2017

Trust can resolve inheritance issues

Theresa Murphy

There are many factors to consider when making a will
There are many factors to consider when making a will

Q: My wife and I are in our 80s and grateful to have a large and close family. We have recently decided to make our wills and have come up against the issue of how to leave the farm to the next generation. Our grandson uses the land and sheds for his stock. However, we have a number of grandchildren and are conscious that everyone should get a share. We do not want to leave him with no land or see the farm immediately sold. Also, if we leave the land to one grandchild how can we be sure the farm will not be sold if his relationship splits up?

A. There are many factors for consideration as you make your will. You will inevitably want to ensure that the costs of your estate are met and that, in your case, the distribution of your assets meets the requirements of having a big family.

Most people, at your stage, do not want to see the farm sold and so the farm lands are typically left to one person, or if there are adequate lands for more than one viable farm, it could be divided in portions.

Marriage breakdown

The current Government has made it clear that it will not be introducing legislation in the area of pre-nuptial agreements despite significant desire for this from, in particular, the farming sector.

If your grandchild were to inherit the farm and also be unlucky enough to have his marriage breakdown irreparably then a pre-nuptial agreement can be important. Although the Irish courts are not currently bound to accept the contents of the agreement as the terms of the separation or divorce, there is significant case law to show that where these agreements are in place, the courts are having regard to them.

As it stands there is nothing in Irish law to prevent couples entering into pre-nuptial agreements. While the Irish courts are not obliged to enforce such an agreement should the couple later separate, legal opinion on the matter sees no reason why the Irish courts should not take pre-nuptial agreements into account when making proper provision for spouses and children.

Even if a couple do not marry, they become qualified co-habitees if they have been living together and are parents of one or more dependent children of the relationship after a period of two years. However, in almost all other cases they must be living together for a period of five years or more. In this case they can enter into an agreement that will have the binding effect of the law, and can protect assets like the farm from having to be transferred or sold in the case of breakdown of the relationship.

The old mechanism used for the preservation of assets within a family is the creation of a trust. Using this mechanism, you would be able to give one person use of the farm for their lifetime, while devising the lands to the next generation, even if they are not yet born.

This is often done in the case where a farm is devised from a grandparent to a grandchild while the grandchild is very young.

The parent of the grandchild would in many instances be given use of the lands either for their lifetime or until the grandchild reaches a predetermined age.

The creation of a trust requires very careful consideration and should be carried out by a legal professional as the courts will not uphold a trust if it is not properly constituted.

One or more trustees need to appointed for a trust and with a property like a farm there will be inevitable duties and responsibilities around the running of the farm that will fall to the trustee.

You should give careful consideration to who is appointed trustee. If you do not have a family member who can carry out this duty, your solicitor will be in a position to advise on this.

The benefit of a trust is that it can keep the lands secure from sale by a generation and in the absence of a pre-nuptial agreement, may well provide a solution to farming families who will to transfer on the farm.

Trusts can be created inter vivos or during the lifetime of the land owner. The advantage of this is that the land owner will be in a position to ensure the trustee/s are adequately carrying out their duties. A trust can also be created in a will.

Although the creation of a trust is a very old legal mechanism it may well provide a solution to the very current problem of those farming families seeking to protect the family farm.

Theresa Murphy is a barrister based in Co Galway

Indo Farming