Maria Connolly Solicitor

Transferring the family farm

One of the most common transactions in a rural legal practise is that of the transfer of the family farm. Historically farms passed to the next in line, usually the eldest son, on the death of the farmer with little or no planning. Nowadays it is widely acknowledged that greater emphasis on planning for the handover of the family farm to the next generation is vital to ensuring future viability and sustainability.

The first step that you should take is to make a Will. This ensures that the farm ends up in the correct hands and that your true wishes and intentions are carried out. Very often the making of a will is put on the long finger as people go about their busy daily lives. However this can have detrimental consequences for the future of the assets in the event of a death. Assets are divided among the next of kin in such a way that it is impossible for the farm to be run as unit, particularly if agreement cannot be reached among the beneficiaries.

The contents of a Will will only take effect from the date of death and can be changed as many times and as often as you wish. A Will does not preclude you from gifting the farm during your lifetime and for many farmers nowadays this is the preferred option. The older generation often come to a point in their lives where they no longer have the energy and enthusiasm to keep the business progressing and are happy to step aside in favour of the next generation. Planning for this particular event should not be in the days and weeks prior to the transfer but several years in advance. Retirement / Pension policies should be put in place so that you have a source of income as an alternative to the income from the farm. Transfer of ownership and control of the farm could also be done on a phased basis so that the older generation can mentor the younger generation while they find their feet. This also affords the younger generation a chance to satisfy themselves that farming is their future and the older generation the comfort of knowing that they are making the right decision.

 A Partnership arrangement is another option which could be explored. This allows the younger generation to become involved in the day to day running of the farm without necessarily transferring ownership of the assets. The share of the profits of the partnership can be increased upwards in favour of the younger generation as time goes on and they become more experienced and assume more responsibility. An arrangement such as this could continue for several years until such time as both the older and younger generation are confident and ready for the transfer of the assets.  

 One major concern for the older generation and their legal advisors is their welfare and security after they have retired and have transferred away all of their assets. Having worked on the farm all of their lives they have a right to expect some form of income after they retire. Good advance planning will ensure that steps are taken now to provide and nest egg for the future such as a pension or retirement plan. In the absence of same it may be necessary to draw an income from the farm. Many deeds transferring the farm assets will include a reservation of right of maintenance and support in favour of the older generation. However, while this provides some security for the older generation it may complicate matters for the younger generation if they need to use the assets as collateral for a loan in the future. In circumstances where the family home is transferred with the lands and outbuildings a right of residence should be reserved for the retiring farmer and his / her spouse.Consideration should also be given to retaining ownership of the family home and some of the farm assets in order to provide some security.

 Efficient tax planning is vital when considering a future transfer of assets and also when making a will. Professional advice should be obtained well in advance as it is possible to take steps to reduce or even eliminate the tax burden. The main taxes to be considered are Capital Acquisitions Tax (CAT), Capital Gains Tax(CGT) and Stamp Duty. The current rate of CAT and CGT is 33% and when applied could create an insurmountable debt for both transferor and transferee. However efficient tax planning will ensure that mechanisms can be put in place to ensure that reliefs and exemptions can be availed of.

 In summary the absence of longterm succession planning can have negative consequences for the future of the farm as the older generation struggle to maintain work levels and enthusiasm and the younger generation become disillusioned with the lack of clarity as to their future. Inefficient tax planning could potentially lead to assets having to be sold to simply discharge the tax bills. Timely advice from professional advisors will assist in finding the most suitable succession plan for you and your farm.

 

Taking out a House Mortgage

A deadline is approaching!

Act quickly to avail of important tax relief on buying a new home

For those people considering buying a house there is an important tax break which has only months left to run and which could be too valuable to let pass.

Most people buying or building a property use a mortgage loan to help them finance part of the purchase price. A mortgage like any other loan involves repaying the lender the amount borrowed plus interest. The state gives some assistance to people who are trying to repay this home-loan interest in the form of mortgage interest relief. The relief operates in the form of a refund from the mortgage lender of part of the mortgage interest paid every month. This refund will apply on a sliding scale of rates until the end of the year 2017 when it will be discontinued. Once you have qualified for the relief the good news is that you will continue to get it until the end of 2017.

 

An example will show how this works in practice:-

A married couple, who are first time buyers draw down a mortgage of €150,000 in December 2012 to buy their main residence. In their first full year of monthly repayments they will pay approximately €5,680 in interest on the mortgage over the full year. If they claim the mortgage interest relief they will get a refund of 25% of this interest back from their mortgage lender. This is almost €1,420 of a refund which works out at just over €118 per month coming back into their bank account.

More details on this relief including information on the maximum interest amounts that qualify together with the rates of relief are available from the Revenue website www.revenue.ie

 

Time is running out to avail of this mortgage interest relief in that mortgages taken out after 31st December 2012 will not qualify for this valuable relief. The key point here is that in order to beat the 31st December deadline and avail of this relief the mortgage needs to be drawn down i.e. the money spent to buy or build the house in question. If you are considering purchasing a house you should start the ball rolling on the transaction early and ensure that you involve your solicitor early in the process. This will ensure that any hiccups or roadblocks along the way can be dealt with in plenty of time before the deadline.

If you are considering buying or building a new home and you require the services of an efficient and thorough solicitor then contact us.

Summary of some of the main tax measures affecting Property Transactions

STAMP DUTY

A new system for applying stamp duty on non-residential property will be introduced with effect from 7th December, 2011. A single rate of 2%will apply on the entire consideration

Non-residential rates

New System Old System
Consideration Rate of Duty Consideration Rate of Duty
Entire Consideration 2% Up to €10,000 NIL
€10,001 to €20,000 1%
€20,001 to €30,000 2%
€30,001 to €40,000 3%
€40,001 to €70,000 4%
€70,001 to €80,000 5%
Over €80,000 6%

Rates on residential property will continue to apply at 1% up to €1 million and 2% thereafter.

Read more: Summary of some of the main tax measures affecting Property Transactions

The Importance of Making a Will

A Will is a document which sets out your directions for the distribution of your assets after you die. It is important for anybody who has assets to make a Will regardless of their age so that their assets pass on to the persons of their choice. It is also important from the point of view that it helps to prevent family disputes and acrimony after your death. A properly made will by a person of sound mind is difficult to dispute.

If a person dies intestate their estate is divided according to the laws of intestacy as set out in the Succession Act, 1965. This could very well mean that your true wishes are not carried out and those who may be most deserving may not benefit at all.

Read more: The Importance of Making a Will

Employment Law Issues in the Recession

As the recession gains more and more momentum by the day, so too does its effect on employment. Desperate times call for desperate measures as employers are forced to look at ways of reducing costs and redundancies are inevitable. It is important that employers and employees alike are aware of the employment law issues surrounding redundancy; employers from the point of view of avoiding an action being brought against them and employees from the point of view of ensuring that their legal rights are protected.

Redundancy in Ireland is governed by the Redundancy Payments Acts, 1967 to 2007 and the Unfair Dismissals (Amendment) Act 1993. Collective redundancies, which involves the laying off of a number of people is governed by the Protection of Employment Acts, 1977 to 2007. This legislation must be followed when an employer employing more than 20 people proposes to make at least five redundant in any period of 30 consecutive days.

Read more: Employment Law Issues in the Recession

Contact Us

26 North Road, Monaghan Town,
Co. Monaghan, Ireland.

Tel: 047 82888

Fax: 047 82814

Click here to contact us

Joomla 1.7 templates by Joomla themes
Copyright 2011 Maria Connolly. All Rights Reserved. Website byAura Internet