What happens if?

Farm businesses face a multitude of risks from weather, disease, markets and changing agricultural policies. There are at least five major risks every farm business should consider and develop plans to address: Death, Disability, Debt, Divorce and Disagreement. Any of these five Ds can create a situation that can seriously damage your farm business, perhaps causing it to fail entirely.

Unfortunately, plans often focus on the best-case scenario and not the worst. A transition plan can help expect the unexpected and plan for it — minimising, if not eliminating, the effects of the dreaded five Ds. Communication is key to reducing the severity of the risks listed below.

An experienced farm solicitor will be able to guide you through making plans and arrangements, including a power of attorney and the best way to structure your business to ensure your family is protected and your farm business can survive.

Once a plan is in place, the documents may only need to be revisited when a situation arises. It can give peace of mind by tackling the elephant in the room and providing a clear pathway for the future.

Thinking about death is unpleasant but it is unfortunately the only certainty among this list – so perhaps the most necessary to make plans towards. Thinking about death can include planning for retirement. Having a clear plan ahead can also minimise frustrations for those that are planned to succeed the business, including staff and family members. In some situations if a plan is not in place, bank accounts and trading rights can be stopped, resulting ultimately in the failure of a business that you have potentially given your whole working life to.  

A good starting point to assist towards reducing disruption during times of grief is listed below: 

• Legal will — Do you have one? Is it up to date? Does everyone know where it is stored? 
• Power of attorney — Do you have one? Is it up to date?  
• Property deeds – Where are they? Do the right people have access? Are there any outstanding disputes regarding the deeds? 
• Partnership agreement – Are parts of the business owned solely by you? Is it fixed asset or is it moveable asset? 
• Mortgage and loan information – Do successors need to be added to these agreements?  
• Details of finance agreements, including end dates  
• Log in details for management systems, such as Gov.uk, accounts programmes and animal recording software  
• Past and current tax records and information 
• Bank account information. Do more signatures need to be added to the account? 
• Up to date debtor and creditor information
• Regular supplier and customer information  
• Accountant, solicitor, bank manager and other appointed service provider details 
• If you employ people – Are there jobs secure? 
• Are your dependants secure in the property or does the house form part of a tenancy for example? Do your spouse and children know the arrangements?  
• For farmers and their children: what happens to my spouse should something happen to me? Will they be looked after?  

Other useful information, depending on the situation: 

• Land ownership details such as title reference, acreage, relative location of properties? 
• Tenancy details, do you have a right to stay at the property should your parent or spouse die? How long for? What happens to the tenancy?  

All of the above, along with details on day-to-day running of the business, should be kept in a useful location to help loved ones to function in times of grief or despair.

Farming is the most dangerous industry in the UK. While this often conjures up the idea of fatalities, alongside that is the risk of injury or long-term disability. In addition there is the possibility of reduced functionality, physically or mentally. Given that agriculture has such strong links to mental health struggles, it is important to note that not all disabilities are of a physical nature.

Consideration should be made regarding potential care requirements and how they might be funded. The most important aspect of considering potential disability is the appointment of a power of attorney should such an unfortunate situation arise.

Farming is often referred to as an asset-rich, cash-poor industry. Consequently, farm businesses can frequently have a large amount of borrowing, whether for land purchase or investment in infrastructure. 

If the farm has substantial levels of debt, are all stakeholders aware of the situation? Do you have a list of borrowing, term length and payments required? If the business is struggling, there may be an option to negotiate an interest-only window to allow the business to deal with cashflow issues. However if this is a recurring or persistent issue it may be worth restructuring loans over a longer period or releasing capital from sale of assets to manage repayments. 

Learn more about restructuring loans

Nobody gets married with the expectation of divorce. But the fact remains that a high proportion of marriages do end that way. Given that many farming operations are high-asset businesses, and that in many cases work is carried out by family members that may not be physically paid for, this can put a business in a difficult position.

Is there potential that the business may be divided in a way that could be detrimental to the business? Do you know what each party’s entitlement may be? Are pre- or post-nuptial agreements in place to safeguard your business?

Within every farming community there are many tales of disagreement among farming families. Working in an environment that is high stress and high stakes is bound to give many opportunities for disputes to arise.

The most common causes for dispute are differing perspectives, goals, expectations, work hours, and the sharing of profits among family members. Profit sharing can be a particular cause for dispute when family inputs are disproportionate; for example one partner works more hours within the business than another, or the amount drawn from the business by different family members differs greatly.

As families grow and increase in size and generations, so too can any historical unresolved issues. These may lead to permanent rupture that can continue through many generations.