Farmers and Trusts
Farmers share one concern: What will happen to the land when I am no longer here to tend it? No matter how small or large the holding, keeping the farm together as a productive unit is a significant challenge.
Add to this the fear that divorce could put the family farm at risk, that diversification could threaten agricultural property relief or that disagreement within the family could jeopardise profitability and it is evident that farmers in the 21st century have worries beyond the field gate.
Trusts are often viewed with suspicion but can be put to good use in addressing such problems.
Trusts can be set up during your lifetime, or in your will. You need a set of trustees and a group of beneficiaries. There are two broad types:
- Discretionary Trusts, where the trustees have the right to pass the assets to any one of the beneficiaries
- Life Interest Trusts, where the beneficiary has the right to receive the income during his or her lifetime, but not the capital. You can say what happens to the income on the death of the beneficiary, and also have wider powers to distribute the capital. Trusts can also be used as a way of protecting assets, whether from divorce or insolvency. Income can be given to a child whilst keeping control of the underlying asset, which can be passed over when the circumstances permit. All of this can be done with minimal tax consequences.
- The farmer, who wants to pass assets out of the estate, benefiting the children whilst retaining a measure of control, could well find that a Trust is the answer. Land which has the possibility of future development could also be put into trust at agricultural value without incurring Inheritance Tax or Capital Gains Tax. This will enable the next generation to benefit from the increase in value. There may even be opportunities to save on the CGT when the land is finally sold.
Each farmer has individual circumstances and concerns which need careful scrutiny. The interplay of the various taxes can be complex. At Blocks Solicitors we like to work with all the clients’ professional advisors to look at needs in the context of family, landholdings, and company and partnership interests. Reviewing your affairs can be rewarding and you may find that Trusts can be a useful and relatively painless solution to many of your problems.
Gerry Field, Managing Partner