Vineyards and wineries are often family businesses and can rely heavily on key individuals. Therefore, handing over to a successor – whether a relative or a third party – can be difficult.
Where families work together or move to England from overseas it is especially important to plan for succession. A basic checklist might be:
- Who owns the assets now? Who should own them in future? What is the most efficient and commercial means of transferring them? Should the next generation receive land or shares now to ensure a smooth handover and perhaps mitigate tax?
- Do you need protection in the event of divorce or mismanagement in future?
- How will siblings share assets? Will one take on responsibility for the business, and if so, should they receive something in return?
- How should the family make decisions, both now and in future?
- Would there be any specific considerations on a sale of the asset or business? For instance, where one child is going to take over the business rather than his or her siblings, should the siblings receive a share of the proceeds if the business is sold?
- How regularly should you review the arrangements? Many families have five or ten year plans in place, and a well-advised family will have regular family or trustee meetings to review plans and pre-empt disputes.
Successful family businesses plan handovers. They gradually involve the next generation in major decisions. They have transparent discussions about the future. Sometimes these discussions are tricky and experienced professional advisers are often helpful. Complicated family structures benefit from a constitution: a single document setting out how the family wishes to run the business, make decisions, choose trustees and board members, and what should happen if the business is sold.
Some of the areas to look out for are:
- What law will apply to your English and / or worldwide estate? In England you can usually leave your estate to whomever you please, as we have testamentary freedom, but in civil law countries (like France, for example), that is often not the case. So you need to consider whether English assets can pass to the intended beneficiaries. It is critical to ensure the succession of both UK and non-UK assets are seen in the round, as some non-UK jurisdictions impose tax on a gift recipient (rather than the donor). It may be sensible to have both a UK Will for UK assets and overseas Wills for non-UK assets.
- What happens when a family member is working on the vineyard in the reliance on a future inheritance but that inheritance does not materialise? They may have a proprietary estoppel claim, entitling them to the vineyard or a suitable portion of it. This often arises where the income from the land is low or variable and family members are not paid commercially (perhaps in the early years of a vineyard), or where a deceased’s estate is one large asset which at least one of the family wants to keep in single ownership. It can apply wherever someone relies on receiving a promised inheritance and acts to their detriment as a result of that promise. Conversely, if the business is passed on during lifetime, has the Will been reviewed to ensure that it reflects current wishes?
- If the business is owned within a trust, disputes can arise between the trustees and beneficiaries or between the trustees themselves – once the asset is in a trust, the settlor cannot dictate the outcome of any dispute – the trustees, the beneficiaries or the court would almost always have to decide. Think carefully about who should be trustee, what powers they need to run the business (and redevelop if the vineyard were no longer an appropriate asset to hold) and what rights different beneficiaries should have or might need to income or to capital.
- If you become domiciled in England and Wales, family members, cohabitants and dependents can claim reasonable financial provision after your death, under the Inheritance (Provision for Family and Dependants) Act 1975. This could be someone living on the vineyard or financially reliant on the land or the income. Keep this in mind in your estate planning.
- If you leave it too late to review your Will, arguments may arise about testamentary capacity. If you involve family members who stand to benefit, others could claim they have unduly influenced the testator or that you did not know and approve the contents of your Will.
All families have disagreements, but with proper planning real disputes can generally be avoided. Lawyers can help by stress-testing estate planning, particularly where the nature of the assets, the testator’s domicile or family structure suggest that a claim might arise. That said, the best way to solve a problem is by avoiding it in the first place, which is why every vineyard or winery owner needs a clear succession plan and sound advice and assistance in preparing it.
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