InsightsInsight - Powers of Attorney, Tax Planning, Wills and Probate - POSTED: February 4 2020
Five simple ways to protect your farm
With our political climate growing evermore uncertain, now has never been a more important time to consider how you can protect your assets for the future.
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If, like so many farms in the region, your family has worked the land for generations, then leaving its future to chance means you risk losing your family legacy.
A Will is a fundamentally important document giving you control over the future of your farming business, ensuring it ends up passing to those you choose. Whatever your age and health, making a Will, or reviewing an existing Will, is essential.
The fall-back provision if you do not make a Will is governed by the rules of intestacy, and the farm may pass to those you would never have intended to inherit it. This can cause unnecessary anguish and expense at an already difficult time for your loved ones.
Lasting Powers of Attorney (LPAs)
It is important to consider what would happen to your business were you unable to make decisions due to a temporary or permanent physical or mental incapacity. Many people believe that next of kin or others in the family business can continue to make decisions in relation to the business, but this is not the case.
Having a personal and, if appropriate, a business LPA containing appropriate provisions will ensure your farming business can continue to run no matter the circumstances. It’s also advisable to make a health and welfare LPA to sit alongside the personal or business LPA.
Review your farming business structure
Speak to experts to review the structure of your farming business, through partnership or company structures, and review the business tenancies.
A properly framed agreement will allow your farming business to continue if a partner retires or dies or if a new partner is brought into the business. In a worst-case scenario, if this has not been planned for then the existing partnership may end and a new one would be required. This could have negative and unintended legal and tax consequences.
Set up a trust
It is becoming increasingly common for land owners to sell their land to developers or to develop it themselves. However, land which has not yet been sold but has been earmarked for development, called ‘hope value’, can lead to unexpected tax bills, most notably issues with inheritance tax (IHT) and capital gains tax. These should be considered at an early stage before hope value is realised.
It is possible to remove the land from the owner’s estate at a lower market value and avoid a larger IHT charge on death. This ensures the increase in the value is contained within the trust rather than within the owner’s personal estate.
By considering the recommendations above, you will have taken steps to protect your faming business and your family – but have you looked after your own future? Do you have somewhere to live or will you continue to draw upon the farm? It is important not to put yourself at risk of retirement poverty and to seek advice at an early stage to plan for your future security.
This article was first published in the December 2019 edition of South East Farmer.
This content is correct at time of publication
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