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Clear and structured succession planning requires both professional advice and honest communication with family members. Poor succession planning and a lack of communication with family members can result in misunderstandings and undesirable proprietary estoppel claims.
Proprietary estoppel
Proprietary estoppel is a legal principle that prevents someone from acting inconsistently with promises that they have given to someone else who consequently relies on that promise to their detriment.
The principle of proprietary estoppel is not a new concept. All too often relationships between families or farming businesses break down over alleged assurances made by parents to children in relation to the future of the family farm(s). When an estoppel claim is brought the implications for the family cannot be underestimated. There can be high emotions, an uncertain and costly court process, and delays to the administration of an estate whilst the court deciphers the intentions of the deceased.
Armstrong v Armstrong
The recent case of Armstrong v Armstrong [2024] highlights many common issues seen in proprietary estoppel disputes. This case involved the estate of Alan Armstrong, who passed away in October 2020, and his wife Margaret, who died in 2018. Alan and Margaret owned two farms, North Cowton and Allerton Grange. Their sons Richard and Simon worked on the farms, with Richard managing North Cowton and Simon overseeing Allerton Grange.
In 2017, the two farms were separated. Alan’s January 2020 Will left Allerton Grange to Simon and North Cowton to Simon’s son, leaving Richard with nothing. Richard brought claims against the estate, alleging he was promised North Cowton throughout his life
The court decided:
- It was more likely than not that Alan promised Richard he would inherit North Cowton. The numerous discussions between Richard and his parents over the years indicated that it was reasonable for Richard to expect to inherit North Cowton. Furthermore, there were various meeting notes from professionals documenting Alan’s assurances and this evidence proved crucial.
- Richard did rely on the promises to his detriment. He chose not to study engineering at university. He had relied on the continuing promises and as a result only received a modest income.
- Alan had broken the promises made to Richard. Richard lived and worked at North Cowton for many years, and it was unconscionable for Alan to make a new will to cut Richard out of his inheritance.
The case serves as a reminder for families to have clear succession plans. Transparent discussions with all family members should help to avoid the very significant financial and emotional fallout of a contested court action.
How to mitigate risks
- Early planning – many farmers delay succession planning for fear of disrupting the current business or due to the emotional strain of discussing the future. However, starting early enables the family to adjust to changes without the pressure of a sudden event like the death or illness of a key figure. If plans have been established many years in advance, claims in proprietary estoppel become weaker.
- Clear and honest communication – good communication among family members helps to avoid misunderstandings and manage expectations. Open conversations are vital to allow family members to express their concerns and ambitions. Any potential conflicts can be identified early in the process and managed.
- Professional advice – consulting with solicitors, accountants, and surveyors is essential. These experts can provide the necessary legal and financial advice to ensure that succession plans deal appropriately with all assets, valuations and tax concerns, as well as complying with relevant regulations. Records of discussions with professionals will be documented and this can provide invaluable evidence.
- Consistency – ensuring all documents complement each other will provide clarity. Conflicting documents can lead to confusion or disputes after a plan is implemented. For example, if a will contradicts a partnership agreement, it could create legal complications and disrupt the intended succession.
Claims in proprietary estoppel are arguably avoidable with open and honest conversations and careful succession planning. If farming families and businesses can be proactive and not reactive when it comes to succession planning, then time, money and emotions can all be spared.
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