Planning ahead to save the farm
It is a sad fact that farmers’ families often face huge inheritance tax bills if effective succession planning has not been implemented. Tax relief is currently available, but many don’t receive it because the required processes have not been followed.
Alarmingly, an NFU Mutual survey in 2017 found that less than 50% of farming families have an effective succession plan in place. Lucy Duffin, Solicitor at Penderlaw, discusses some simple and cost-effective steps which can be taken to avoid storing up problems for the future.
A valid Will
Ensuring that a valid Will exists, that is valid and also up to date is a good start. Perhaps an obvious point but unfortunately, it is far too common to see farms being broken up on the death of a farmer because that person has died with an inadequate Will, or even no Will at all. Intestacy can produce undesired outcomes that could be easily prevented with a properly considered Will. There is also a great deal of scope for estate planning with the preparation of a Will, which most people do not realise. Wills do not need to be rigid static documents if it is not appropriate for them to be so!
Careful consideration should be given to succession planning. Will a surviving spouse remain living at/ working on the farm? Should the farm be left to certain children with others being given other assets of equal value? Or, should the farm be split between all the children equally? A lack of succession planning and a reluctance to face up to some difficult questions, can often be the root cause of contentious probate disputes, which then become extremely acrimonious and are usually very expensive to the estate!
Ensure you take advantage of the tax relief options available
The amount of tax due when a farm is passed on to successors can currently be reduced with Agricultural Property Relief (APR) and Business Property Relief (BPR). Most farmers’ estates are eligible to use a combination of APR and BPR if they fulfil the criteria for claiming the reliefs. BPR has become more important over recent years, as farmers diversify into a range of other areas such as accommodation, tourism and farm shops. However, it should be noted that these forms of tax relief can easily be lost if appropriate legal documentation has not been completed and the correct advice is not sought at the right time. We also work closely with accountants when required to ensure that the tax position and succession plans do not conflict.
Review your legal and accountancy documents
A thorough review of legal and accountancy documentation will usually save a good chunk of inheritance tax and a few reasonably inexpensive steps can be taken to maximise inheritance tax reliefs available. Whilst this may seem like a cumbersome task initially, the benefit can be significant in ensuring that your affairs are as simple and efficient as they can be for those left behind to deal with. We can assist with tackling this task and also with regular reviews thereafter.
Get in touch
If you would like to speak to our experienced team about succession planning or to assist with disputes around agricultural probate, please get in touch. You can call us on 01872 241408 or email firstname.lastname@example.org