Family business succession planning warning
An expert has highlighted the importance of good succession planning for family businesses after a high profile case which has seen a family divided over the ownership of their farm.In the case, it was reported that James Davies worked on his family farm for 10p an hour because he understood the £1m farm would be left to him by his father.
However, when his father died his Will asked for the farm to be divided equally between Mr Davies and his siblings, which caused a dispute resulting in a court decision in Mr Davies’ favour.According to Stephanie Kerr, solicitor in the Litigation team at Lancashire law firm Napthens, the case highlights the importance of good succession planning.
She said: “In this case it appears the farmer Mr Davies has relied on the word of his father that he would come to inherit a substantial farm, and worked hard to ensure the farm business was a success, going so far as to put his own money into the farm business“However, many years after his father’s death when the Will has been read, it transpired that the farm had been left to the farmer only until his 60th birthday, after which it was to be split between the farmer and his four siblings.
“This is not an unusual scenario. It is common to find a family business which is run by one child, while the others have taken the decision not to be involved.“It is therefore important for anybody in this situation to ensure that they are having regular open and honest discussions about the future and trying to ensure legal documents such as Wills reflect those discussions and wishes.
“Independent advice should also be sought when planning for the future and when any major decision is taken about a business those changes should be documented to avoid disputes later on.“A specialist in contested estates, recognised by the Association of Contentious Trust and Probate Specialists (ACTAPS), should be consulted if similar circumstances arise, rather than simply the family solicitor who drew up the Will or a non-specialist. “Where a number of children are involved and could come to inherit in the future, it is equally important to ensure that all parties are clear in setting out their intentions, so no confusion can arise, as has occurred in this case.”