Protecting a family farm for future generations
For many farming families, the future of the business is the future of the family, which is why probate and inheritance are of utmost importance.
When the S family came to see me to discuss updating Wills and estate planning, they raised concerns we often hear in Wilkin Chapman’s agricultural probate team. Primarily, they wanted to know how to:
Minimise inheritance tax by effective use of agricultural and business reliefs
Minimise the impact of any care fees on the estate
Ensure that the farm business can continue to operate and trade during the administration of the estate
Promote equality between ALL potential beneficiaries, especially where they don’t all work on the farm.
If you’re reading this and you’ve wondered the same things, you’ll be pleased to know that the first three of these can be fairly easily resolved by having an experienced legal adviser who understands the issues and can implement proper planning.
For example, we advise our farming clients that the older generation should continue to take as active a role as possible in the running of the farming activities to ensure inheritance tax reliefs are available and NEVER refer to anyone on a death certificate as “retired farmer”. If they’re physically unable to do as much as they used to, that’s fine; clerical and office work counts, just as much as getting stuck in at the deep end.
In respect of tax and care fee planning, we can use trusts to protect against the impact of care fees on someone’s assets. We include appropriate administrative provisions in our Wills to give executors the power so they can continue operating the farming business and trade.
However, the last concern - how to promote equality among potential beneficiaries - is the trickiest to solve. This is where our expertise can play a supportive role and help avoid future conflict or upset.
What you need to start with is to acknowledge the competing interests of various family members.
With the S family, two of the three children work on the family farm, while the third does not. Clearly, this could be a cause for concern as it would be easy to have the two farming children treated more or less agreeably than the non-farmer.
The resolution they came to was to pass the business interests to the two farmers but to split the land between all three children. They acknowledged that doing this would have an impact on the business but, to the clients, splitting the land value equally between all children was more important than this.
Because this is a personal and financial decision that affects a family, other clients/families may reach a different conclusion.
For example, I have clients who decided to leave the farm business and farmland to the one child for whom it provided a livelihood, meaning that the other two children would receive less than one third of the total estate.
In another case, the clients decided to put the whole estate into a discretionary trust so that the decision would be made at some later point by the appointed trustees. They left guidance to those trustees in the form of a letter of wishes setting out how they thought the splitting of assets might work (but giving the trustees the flexibility to change this if circumstances had altered).
What is very important though, is wherever possible, you should take everyone along with you from the start.
Get the family around the table to explain your thought process and listen to and try to address their worries. It might not be possible to resolve everything but talking it through is always better than the risk of distressed family members also having to deal with your decision where it comes out of the blue.
Remember, we are with you every step of the way and we can help you and your family prepare for the future. For further information, please contact Michele Wightman.
Contact Michele to discuss this further.
