Planning for the future at Christmas time

    As the end of the year approaches many agricultural families, whether tenants or owner occupiers, will be thinking to the year ahead.

    For some this quieter time of year, when families gather together, will be the ideal time to plan and discuss, not only operational aspects, but also the future management and ownership of their farms and farm businesses.

    Estate planning is the process of controlling your assets during your life-time, as well as after your death. Unlike many other businesses the farm is usually passed onto another member of the family. Succession planning is often a taboo subject within families, which goes some way to explaining the results of the recent Barclay’s Wealth survey which revealed 44% of farmers have no formal succession plan.

    Many will have an emotional as well as economic attachment to the farm, and some can never see themselves as anything but farmers. In addition, inheritance can often create tension among siblings. However, in a tough economic climate when cash flow is tight, it is more important than ever before to avoid pitfalls in relation to the transfer of heritable assets, as well as interests in farm tenancies. And it is vitally important to involve all family members in putting together an appropriate succession plan, particularly if there are additional offspring to those who are due to take over the business.

    A well thought out plan should focus on three main objectives: Ensuring you retain sufficient assets, and or control, to provide you with the necessary income and resources upon which to live during retirement; Ensuring that upon your death, your assets go to the people you intended, while still making provision for those outside the family business; Minimising your estate’s liability in respect of Inheritance Tax.

    Inheritance Tax reliefs, such as Agricultural Property Relief (APR) and Business Property Relief (BPR) can be a major benefit but it is essential to have a clear understanding of the rules and pitfalls if future generations are not to be saddled with substantial tax burdens.

    The rural property team at Savills have acted as expert witnesses in high profile HMRC cases such as Antrobus and Golding in relation to the application of APR to farmhouses. Savills Balfour Matrix is also a useful tool to facilitate estate planning and can help achieve a well planned approach to asset protection. This is especially important in complicated businesses with a mixture of trading and let property income, the balance of which can seriously affect any application for Business Property Relief.

    The value of land and property has risen significantly over the last ten to twelve years. As a result many family farms hold substantial value so it is important that plans and scenarios are discussed well in advance.

    Seeking professional advice to help facilitate the process can help give a well advised and impartial contribution to the decision making process.

     
     

    Key contacts

    Clive Beer

    Clive Beer

    Head of Professional Services
    Rural

    Savills Margaret Street

    +44 (0) 20 7877 4724

    +44 (0) 20 7877 4724

     

    Hugo Struthers

    Hugo Struthers

    Director
    Rural

    Savills Perth

    +44 (0) 01738 477 501

    +44 (0) 01738 477 501