When it comes to managing financial affairs, estate and succession planning can be very stressful, both for the person transferring assets and those receiving them.
The value of bloodstock, land, businesses and personal assets within the equine industry can vary significantly. Regardless of these circumstances, you will need to consider what will happen to the assets in the event of death, or should you wish to retire.
When I meet people to discuss their financial affairs, one of the main areas of focus is succession planning. The key question is between planning for succession by either transferring assets during your lifetime or through your will. I outline below some points and actions you might wish to consider looking to reduce stress for all concerned.
The importance of a will
Regardless of your stage in life, we believe everyone should have a will in place. It should be reviewed on a regular basis, particularly if your personal circumstances change significantly.
Writing a will is especially important if you have children or other family members who depend on you financially. If you die without a will in place, you will be intestate. In these circumstances the Succession Act will dictate how your assets are dispersed regardless of what your wishes or intentions might have been. Unfortunately, at a time of significant personal loss to your immediate family, the lack of a will can lead to bitter family disputes and negatively impact your business assets. It may also delay the distribution of your assets.
You can also plan for succession and transfer of assets while you are alive. Depending on your personal circumstances, once you have identified what assets you may need to support yourself financially, you may wish to consider transferring any surplus to your beneficiaries during your life. This is much more relevant today as the value of bloodstock, land and businesses have increased in recent years.
The increasing life expectancy might also influence whether the next generation may be able to avail of agricultural or business asset relief, as there’s a risk of benefits being reduced if the transfer is left until you get older.
Involve your family early
Even if money is something you’ve never spoken about with your children or other beneficiaries, once you start considering succession planning and your will, that is the time to open the discussion and involve them so that they understand your intentions. It is an important conversation to have, given the number of families that have fallen out over inheritance.
Equalisation of the estate is another important issue, where one asset is left to one person and an asset of equivalent value is left to another. In many cases the primary assets may be either a business or a farm. In order to avoid a disposal of assets, or one beneficiary having to take on debt, you should consider accumulating separate pools of assets that can be used to facilitate this, by diverting surplus assets over your lifetime to savings and retirement funds.
Enduring power of attorney
An enduring power of attorney, sometimes referred to as a ‘living will’, is a ‘just in case’ document and deals with either a permanent or temporary loss of mental capacity. Importantly, it ensures your financial affairs can continue to be managed by a person(s) of your choosing.
Given the risks of an accident associated with equine activities, you should consider putting an enduring power of attorney in place.
Joint bank accounts
Another quick win is setting up a joint bank account. In the event of your death, your partner will have access to cash while your estate goes through probate.
It may not be possible for some but if your intention is to leave everything to your spouse, you can hold all your assets as joint tenants which will avoid the need to take out a Grant of Probate. In the case of assets held as joint tenants with your spouse, on your death, a simple application for the surviving joint tenant will transfer the property to the survivor without the cost and time incurred in having to obtain a Grant of Probate. As there is no inheritance tax payable between spouses, holding assets as joint tenants is a quick and cost-effective way to transfer assets to your spouse.
Which assets to transfer, how to do it in the most efficient way, and when to do it – now or as part of the estate – are key questions to be teased out as part of your financial life planning. If you are thinking about transferring assets, start planning today.
David O’Brien is a Director at Davy Private Clients and an active participant in the equestrian sector. He works with business owners to provide best-in-class financial planning, investment management and asset selection. You can contact David directly on 01 614 9123 or email him at firstname.lastname@example.org.
Please note that this article is general in nature, and does not take account of your financial situation or investment objectives. It is not intended to constitute tax, financial or legal advice and is based on Davy’s understanding of current tax legislation in Ireland. Davy does not provide tax or legal advice. Prior to making any decision which may have tax, legal or other financial implications you should seek independent professional advice. There are risks associated with putting any financial plan or strategy in place. The value of investments may go down as well as up.
Davy Private Clients is a division of J&E Davy. J&E Davy, trading as Davy, is regulated by the Central Bank of Ireland.