Question: We are discussing a farm transfer as I am turning 35 later this year. I am anxious that the farmhouse would transfer with the farm but my mother is reluctant to do so. She said she wants to retain ownership and can leave it to me in her will. While I appreciate it is a big ask, I am fearful it could cause issues down the line. The problem is where the house is situated, in the middle of the farm. Ours is further away. All we foresee with it are problems and this is something that is really worrying us. Have you any advice?

Answer: It’s an issue that comes up a lot in my office, the prospect of transferring the family home striking the fear of god into a parent, especially mothers.

It is worth laying out the options so that the family can make an informed decision: to retain the full ownership of the dwelling house and transfer all the land, or to retain full ownership of the house and transfer some of the land transfer ownership of the dwelling house and retain either a general right of residence or an exclusive right of residence/life interest.

Legal implications of options

If your mother retains ownership of the house, she is entitled to do what she likes with it as owner including leaving it to anyone of her choosing under her will.

If your mother retains an exclusive right of residence or a life interest, she will own the house for her life and you will automatically own it when she dies. She cannot leave it to someone else under her will or transfer it during her lifetime.

If your mother retained a general right of residence, you will own the house now and your mother will have a right to live in the house. However, this would mean that you as the owner of the house could move into the house or indeed could move others into the house with your mother. Your mother would not be legally able to prevent this if she only retained a general right of residence.

Fair Deal Scheme

From a Fair Deal perspective, the house would be regarded as an asset and would be taken into account, in terms of paying for nursing home care.

If both parents were alive and in the event of either of them needing nursing home care, only 3.75% of the value of the house would be taken into account as an asset for the purpose of the Fair Deal. Otherwise it’s 7.5%.

The house is only taken into account as an asset for the first three years of nursing home care, known as the three year cap.

By way of illustration, let’s assume the house was worth €300,000. Then 3.75% would be a contribution of €11,250 per annum. Divided by 52 weeks, this would be a weekly contribution of €216 towards nursing home care by virtue of retaining ownership of the dwelling house. Contrast this with a scenario where there is only one parent alive requiring nursing home care. The contribution to care increases to 7.5%, or €22,500 per annum. Divided by 52 weeks, this would be a contribution of €432 per week towards nursing home care by retaining ownership of the dwelling house.

A general right of residence would not be taken into account as an asset for the Fair Deal.

However, retaining an exclusive right of residence or a life interest would be taken into account as an asset for Fair Deal.

Agricultural Relief

If the farmhouse was transferred at the same time as the lands retaining a general right of residence, it would qualify as an agricultural asset, and thus would qualify for Agricultural Relief. If the dwelling house was retained and subsequently passed under a will, it would no longer qualify as a farmhouse for the purposes of Agricultural Relief.

If your mother were to retain an exclusive right of residence in the dwelling house, that house would not transfer until some point in the future and again would not qualify for Agricultural Relief.

When it comes to succession planning ask the question: “if the farmhouse was sold, could the new owners potentially impact on the running of the farm in terms of complaining about noises/smells etc?” If the answer is yes, then the farmhouse should not be separated from the family farm. That said, the primary concern should be to provide for parents so that they can be emotionally and financially secure for the rest of their days after years working the farm.

Disclaimer: The information in this article is intended as a general guide only. While every care is taken to ensure accuracy of information contained in this article, Aisling Meehan, Agricultural Solicitors and Tax Consultants does not accept responsibility for errors or omissions howsoever arising. E-mail aisling@agrisolicitors.ie