Agreements amongst Family:
Block one (120 acres) is to be transferred to the son with livestock, BPS and debts.Ownership of block two (40 acres) is to be retained by the parents and leased to son for €180/acre under a 15-year lease initially. Rental income for parents of €7,200/annum.Block three (20 acres) is to be transferred to the son with a charge for the parents.The son will join the trading partnership at 25% and increase to 100%.Investments to daughter by will.PARENTS
1. Capital Gains tax reliefs available but must:
Have owned and farmed the land for 10 years prior to disposal.Have not been let out for more than 25 years.Traps
Ensure both parties qualify for the relief if the land is in joint names.Ensure the land is owned longer than 10 years and has been farmed for that time.2. Income Tax
Block number two of 40 acres is to be leased from the parents for €7,200 per annum. The parents will not be able to avail of the leased land exemption as the land is through a connected party. They will also be liable on their share of profit.
SON
1. Stamp Duty
The 1% rate of duty will apply on the land, it would mean an €18,000 bill for the stamp duty on the basis that he spends more than 50% of his time farming the land.
2. Gift Tax
Without relief, the liability could be approximately €530,000. However, if certain conditions are met this would not be the case:
90% of his assets are agricultural as at the date of transfer.He farms it as an active farmer.Based on the value of assets transferring and getting the relief means he is liable on €185,000. He is allowed to receive €320,000 tax free plus an annual gift of €3,000 from each parent, therefore, on looking at it, the son will have no liability.
Traps
All gifts to the son since 5 December 1991 are aggregated. Has he got a site and, if so, what value was on same.The debt charge on the land in favour of the parents if released at some stage and it has not been paid down, will be a further gift/inheritance to the son.DAUGHTERS
Threshold of €320,000 each.
Legal advice by James Staine
Charge on Land
On the €200,000 – this charge could be used as a possible penalty if the son sells the farm. Other alternatives are that the son pay a fee to the parents for consulting services on the farm (say of €10,000 – €15,000) towards the parents’ costs and maintenance in the home
Family Home
If transferring the family home to their son, ensure that they have an exclusive right of residence in the property, registered as a burden on part of the folio. However if they are minded, keep the home and leave to one or both of the daughters.
Fair Deal Scheme
Parents need to consider nursing home costs and be aware of the current five-year look-back provision where farm assets transferred within five years of the application for the Fair Deal Scheme can be taken into account when calculating the parents’ assets. These can be charged at 7.5% of their value towards the nursing home costs (three-year limit of family home but currently no time limit on farm land though this is likely to change.)
Will
The parents can make provision for the daughters in the will by, for example, leaving them the family home, cash in the bank or any stocks and shares they may hold or transfer a site.
Next Steps
Instruct separate firms of solicitors to act on behalf of parents and son. Market valuation of land/stock/machinery/house at the date of transfer will be needed. They should ensure that they get a costs letter in advance from the respective solicitors.
Read more
Succession planning: let's get talking
Agreements amongst Family:
Block one (120 acres) is to be transferred to the son with livestock, BPS and debts.Ownership of block two (40 acres) is to be retained by the parents and leased to son for €180/acre under a 15-year lease initially. Rental income for parents of €7,200/annum.Block three (20 acres) is to be transferred to the son with a charge for the parents.The son will join the trading partnership at 25% and increase to 100%.Investments to daughter by will.PARENTS
1. Capital Gains tax reliefs available but must:
Have owned and farmed the land for 10 years prior to disposal.Have not been let out for more than 25 years.Traps
Ensure both parties qualify for the relief if the land is in joint names.Ensure the land is owned longer than 10 years and has been farmed for that time.2. Income Tax
Block number two of 40 acres is to be leased from the parents for €7,200 per annum. The parents will not be able to avail of the leased land exemption as the land is through a connected party. They will also be liable on their share of profit.
SON
1. Stamp Duty
The 1% rate of duty will apply on the land, it would mean an €18,000 bill for the stamp duty on the basis that he spends more than 50% of his time farming the land.
2. Gift Tax
Without relief, the liability could be approximately €530,000. However, if certain conditions are met this would not be the case:
90% of his assets are agricultural as at the date of transfer.He farms it as an active farmer.Based on the value of assets transferring and getting the relief means he is liable on €185,000. He is allowed to receive €320,000 tax free plus an annual gift of €3,000 from each parent, therefore, on looking at it, the son will have no liability.
Traps
All gifts to the son since 5 December 1991 are aggregated. Has he got a site and, if so, what value was on same.The debt charge on the land in favour of the parents if released at some stage and it has not been paid down, will be a further gift/inheritance to the son.DAUGHTERS
Threshold of €320,000 each.
Legal advice by James Staine
Charge on Land
On the €200,000 – this charge could be used as a possible penalty if the son sells the farm. Other alternatives are that the son pay a fee to the parents for consulting services on the farm (say of €10,000 – €15,000) towards the parents’ costs and maintenance in the home
Family Home
If transferring the family home to their son, ensure that they have an exclusive right of residence in the property, registered as a burden on part of the folio. However if they are minded, keep the home and leave to one or both of the daughters.
Fair Deal Scheme
Parents need to consider nursing home costs and be aware of the current five-year look-back provision where farm assets transferred within five years of the application for the Fair Deal Scheme can be taken into account when calculating the parents’ assets. These can be charged at 7.5% of their value towards the nursing home costs (three-year limit of family home but currently no time limit on farm land though this is likely to change.)
Will
The parents can make provision for the daughters in the will by, for example, leaving them the family home, cash in the bank or any stocks and shares they may hold or transfer a site.
Next Steps
Instruct separate firms of solicitors to act on behalf of parents and son. Market valuation of land/stock/machinery/house at the date of transfer will be needed. They should ensure that they get a costs letter in advance from the respective solicitors.
Read more
Succession planning: let's get talking
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