Is transferring the farm on your ‘to-do’ list?

He had intentions for the past few years of transferring the farm over to his son Sean, but just had not ‘got round to it’. It was something he didn’t think much about, as everyone in the family always assumed that Sean would be given the farm but he kept leaving it on his ‘to-do list’.

Now, he was afraid it was too late. He wanted to transfer the farm to Sean during his lifetime, and did not wish for it to pass in his will. He was worried over the amount of stamp duty Sean would have to pay on foot of the transfer.

Sean had his Teagasc Green Certificate, and was 40 year old. Sean was helping on the farm, and did not work off the farm. Edward is 63 years old.

After some discussion about his circumstances and his personal and family’s goals for the future, I advised Edward that, by virtue of the fact that Sean is over the age of 35 (even though he has his Teagasc Green Cert), he would not qualify for Young Trained Farmer Relief, and therefore would not be exempt from Stamp Duty.

In the case of non-residential property, stamp duty is payable at half the normal rate applicable if there is a transfer of property to certain relatives, for example, a child, niece or a nephew.

This is known as consanguinity relief. It is proposed that this will be abolished at the end of 2018, and it only applies where the transferor or transferors are aged under 67 at the date of the transfer.

So, if Edward transfers the farm to Sean before December 31, 2018, Sean will be liable for stamp duty at a rate of 1% of the value of the lands.

After that date, Sean will be liable at a rate of 2% stamp duty on the value of the lands.

Let’s say the land is worth €1,000,000, and Edward transferred the farm in its entirety to Sean, into his sole name, Sean would be liable for stamp duty in the sum of €10,000, if the transfer takes place before December 31, 2018. If it takes place after the said date, Sean would be liable for stamp duty at a rate of 2%, amounting to €20,000 (assuming the value of the land and rate of stamp duty stay the same).

I also advised Edward that he could consider transferring the farmlands into the joint names of himself and Sean. There are advantages and disadvantages to doing this.

It would reduce the stamp duty payable by Sean, as he would be paying on the value he was getting, which is one half of the value of the farm. The farm would be placed in joint names.

This means that when one party dies, the property automatically vests in the surviving owner. In some circumstances, there will be no need to extract a Grant of Probate.

Joint tenancy is a way of owning property in the names of two or more people.

When one person dies, the survivor becomes the sole owner. Both parties have equal responsibility for the farmland. In other words, they both enjoy its positive attributes and share in the liabilities equally.

It would allow Edward to retain control over the land until he passes away. It can also be beneficial in the event of the untimely death of Sean. Where he predeceases Edward, the land would revert to Edward in its entirety.

Let’s say all of the lands were transferred to Sean, and Sean subsequently passed away. The land would pass according to Sean’s will, or the rules of intestacy if Sean did not leave a will.

Before Edward considers transferring the land in his son’s sole name, or their joint names, both parties need to consult with their tax consultant and/or accountant, and Teagasc advisor, to ensure that there wouldn’t be any adverse effects for either of them in relation to tax, farm entitlements etc.

Edward should also consult with the Department of Social Protection in relation to his pension entitlements.

Practicalities and daily farming life should also be taken into account.

It is also important for Edward to be aware that if he would be a joint owner of the farmland, this would be taken in account in an application for relief in relation to state support, or ancillary state support for nursing home expenses when assessing his assets and means.

It is important to review and update your will after any transfer of farmland.

Transferring the farm into the joint names of a parent and child might suit some people, but both parties’ circumstances would have to be closely looked at before any deed is executed.

One thing for sure; it is best not to rush into things.

After all, the decisions made today determine your tomorrow.

Karen Walsh, from a farming background, is a solicitor practicing in Walsh & Partners, Solicitors, 17, South Mall, Cork (021-4270200), and author of ‘Farming and the Law’. Walsh & Partners also specialises in personal injury claims, conveyancing, probate and family law.

While every care is taken to ensure accuracy of information contained in this article, solicitor Karen Walsh does not accept responsibility for errors or omissions howsoever arising, and you should seek legal advice in relation to your particular circumstances at the earliest possible time.