The future of farming: keeping divorce out of the courts
Simplifying planning for the future
When it comes to planning for the future, protecting your family and assets sit high on the agenda. However, this process can also feel overwhelming, meaning many people only take action in response to something that has already happened – and often by this time it is too late to mitigate the impact.
Making decisions that are best for you and your family doesn’t have to be complicated. Below are three simple steps you can take which can help you protect your loved ones and everything you have worked for.
Prepare a will
A will is essential to make sure your assets pass to the people of your choice on your death in a tax efficient manner, as well as enabling you to appoint guardians for your minor children.
A well drafted will may last you a lifetime (depending on any change in your family circumstances and your own personal wealth) but you should review your will every 3 – 5 years, to ensure that it remains relevant in light of any changes to the tax legislation; your lawyer will be able to review and update it as needed.
Prepare lasting powers of attorney (LPA)
There are two types of LPA that you should consider putting in place, each covering:
- property and financial affairs; and
- health and welfare.
Many people will opt to have both LPAs so that if they lose mental capacity in the future they have chosen people they trust to make decisions for them and look after their health, wellbeing and financial interests.
If you also have an interest in a business you may consider implementing a variation of the property and financial affairs LPA to create a business LPA. In this document you would establish your interests in your business and identify who can make decisions for your business if in the future you are unable to. This means if something were to happen to your mental capability on a temporary or permanent basis, your business can continue to thrive.
Maximise your estate’s entitlement to valuable inheritance tax reliefs such as Agricultural Relief (AR) and Business Relief (BR)
AR and BR are widely coveted and very valuable inheritance tax reliefs, available to estates which satisfy the strict criteria set out in legislation and case law.
If you own a business or have land which is farmed, AR and BR should be considered. A specialist lawyer in this field will be able to ascertain whether you are likely to achieve AR and/or BR and whether there are any steps you should be taking to increase your chances or make your claim stronger.
If you do achieve AR and/or BR, then up to 100% of the value of the assets that achieved the relief may be subject to an inheritance tax exemption. AR and BR are typically only tested on death and so there can be no guarantee that any estate will successfully claim them, but there are steps which you can take now to increase the probability of your personal representatives successfully claiming these reliefs on your death.
Succession planning is a prominent issue for individuals in the agricultural and rural sector and this article only highlights a few of the relevant key points when considering how best to protect your family and your assets. For specific advice, you should contact a specialist lawyer who will be able to advise on the best course of action based on your individual circumstances.
This article was first published in the May 2019 edition of South East Farmer.
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