As is often quoted, farming is one of the few occupations where the finances of both the business and the family are intrinsically linked leading to serious implications if either element comes under significant financial pressure.
From the family perspective, the most common pressure points are divorce, death and care home fees, with the latter becoming an increasingly significant issue as we lead longer, but not necessarily healthier, lives. Much has been written and said about the rising cost of care home fees and the need to liquidate assets to pay them – and nowhere does this resonate more than in the farming world where assets normally mean land – the very thing no farmer wants to lose.
Care home fees require significant outlay
The desire of most farmers and landowners to pass on the land intact to the next generation can be thwarted by a need to raise capital to pay for long term care. Although prices vary across the country, according to carehome.co.uk the monthly average for a care home is around £4,640, rising to £5,640 or more if nursing care is also needed. Although our private client team regularly advises farming families on estate planning in the event of death, the prospect of having to fund long term care is rarely discussed but is becoming an ever more pressing concern. Even when paying for care has been factored into the family’s plans, the length of time care may be required may not have been.
How to plan for care without compromising the farm business
A well drafted partnership agreement, prepared in conjunction with relevant wills, can help to put the right provisions and support in place but they must be regularly reviewed together. Accurate record keeping is also essential so that everyone knows who owns which assets - including those with a beneficial interest - making it easier to identify which assets might be at risk of being liquidated to pay care home fees. This should naturally lead into wider conversations about tax planning, business structures and any scope for investing money outside the business that can be ringfenced.
Don’t overlook lasting powers of attorney
Other important documents to have in place are Lasting Powers of Attorney, one covering health and welfare, and the other finances and property. It is often the case that a sudden or gradual mental deterioration affecting the mental capacity of a family member or partner is often not recognised, let alone acknowledged, until it is too late which could severely impact the ability of the partnership to deal with any assets and to enable the farming partnership to continue operating. However, it is important to avoid any conflicts of interest – the attorney must operate in the best interests of the person affected, which may be at odds with the best interest of the business. Without a power of attorney, a family may need to apply to the Court of Protection, which is both time-consuming and costly, but may be the only way to achieve the best outcome for the family member/partner and the partnership.
Prepare for the worst, hope for the best
We cannot emphasise enough the importance of facing up to the possibility of mental or physical incapacity that may lead to the need for professional care. By preparing for the worst case scenario, it will be easier to lessen the potential impact of care home fees on a farming partnership arrangement. We can talk you through the elements you need to consider from protecting your business through to the care process, including when and how much you should pay, the sale of assets pay for care, contributions from family members, and how to ensure that the care placement is the right place providing the right care.
Hannah was originally interviewed by Farmers Weekly in July 2024 for an article on this subject.
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