Agricultural And Farming Trusts: A Guide For Blended Families

Blended families—those where one or both partners have children from previous relationships—are becoming increasingly common in the UK. While blending families can bring joy and fulfilment, it also introduces unique challenges when it comes to estate planning, especially in the agricultural sector. Ensuring that a farm is passed on in a way that meets the needs of all family members while preserving the farm’s legacy requires careful planning.

At Blackstone Solicitors, we understand the complexities of agricultural and farming trusts, especially for blended families across England and Wales. In this article, we will explain how agricultural trusts can be structured to address the particular needs of blended families, ensuring the farm’s future is secured and family harmony is maintained.

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Why Are Agricultural Trusts Important for Blended Families?

Estate planning for a farm is never straightforward, but it can be especially complex when there are children from previous relationships involved. In a blended family, the main concerns typically include:

1. Protecting the Farm’s Legacy: The farm is often a multi-generational asset with deep family roots. You may wish to ensure that the farm remains in the family and continues to be used for agricultural purposes for future generations.
2. Providing for a Surviving Spouse: You might want to ensure that your spouse is financially supported while also making provisions for your children from a previous relationship.
3. Avoiding Disputes Among Heirs: Blended families may have different expectations about inheritance, which can lead to disputes if the estate is not managed carefully. An agricultural trust can help prevent these issues by clearly defining who will benefit from the farm and under what circumstances.

What Is an Agricultural or Farming Trust?

An agricultural or farming trust is a legal arrangement that allows a person (the settlor) to transfer ownership of their farm to trustees, who manage the property on behalf of beneficiaries. This structure can help preserve the farm, provide for family members, and address potential tax issues.

For blended families, trusts can be particularly useful as they offer flexibility in how assets are distributed. For example, a trust can ensure that your surviving spouse can live on and benefit from the farm during their lifetime while guaranteeing that the farm is ultimately passed to your children.

Types of Trusts Suitable for Agricultural and Farming Assets

Several types of trusts can be used to cater to the needs of blended families in the context of farming and agricultural assets. Each type offers different benefits and has unique implications for how the farm is managed and passed on. Here are the main types of trusts commonly used:

1. Life Interest Trust (Interest in Possession Trust): In a life interest trust, a beneficiary (often the surviving spouse) has the right to receive income from the trust or use the farm during their lifetime. However, they do not own the property outright. Upon their death, the farm can then pass to other beneficiaries, such as children from a previous relationship. This type of trust ensures that the surviving spouse is taken care of while also preserving the farm for the next generation.
2. Discretionary Trust: A discretionary trust gives trustees the flexibility to decide how and when to distribute the trust’s income or assets to the beneficiaries. This is particularly useful for blended families, where circumstances may change over time. Trustees can make decisions based on the current needs of the beneficiaries, providing support as needed while keeping the farm intact.
3. Bare Trust: In a bare trust, the beneficiaries are absolutely entitled to the assets, meaning they have a legal right to the farm at a specified age. While this type of trust provides less flexibility, it may be suitable if you have a clear succession plan for the farm, such as passing it directly to your children.

Steps for Setting Up an Agricultural Trust for a Blended Family

To ensure that the trust meets your family’s needs and complies with legal requirements in England and Wales, follow these steps when setting up an agricultural trust:

1. Consult with a Legal Professional

Given the complexities involved in agricultural trusts and blended family arrangements, it is essential to seek advice from a solicitor with expertise in this area. At Blackstone Solicitors, we can guide you through the process, helping you understand your options and advising you on the most suitable type of trust for your situation.

2. Define Your Objectives

Clarifying what you want to achieve with the trust is crucial. Do you want to ensure that your spouse can continue living on the farm while also providing for your children? Are you concerned about avoiding inheritance tax? Do you want to protect the farm from potential financial risks, such as creditors or divorce settlements? Your objectives will shape the type of trust you establish and how the trust deed is drafted.

3. Select the Appropriate Type of Trust

Choosing the right type of trust will depend on your specific goals and family circumstances. For example, if your priority is to ensure your spouse is supported while also preserving the farm for your children, a life interest trust may be the best option. If you prefer more flexibility in distributing the assets, a discretionary trust might be more suitable.

4. Appoint Trustees

Trustees play a critical role in managing the trust’s assets and ensuring that the terms of the trust are fulfilled. You should appoint at least two trustees who can act impartially in the interests of all beneficiaries. This may include family members, trusted friends, or professional advisers. It’s important to choose individuals who are knowledgeable about farming or who have experience in estate management.

5. Transfer the Farm to the Trust

Once the trust is established, you need to transfer the ownership of the farm and any related assets (such as equipment or livestock) to the trust. This involves legally changing the ownership of these assets to the trustees, who will hold them on behalf of the beneficiaries according to the terms of the trust deed.

6. Understand the Tax Implications

One of the key considerations when setting up a farming trust is understanding the tax implications. Agricultural Property Relief (APR) and Business Property Relief (BPR) can provide significant inheritance tax savings if the farm meets the necessary criteria.

For example, APR may reduce the value of agricultural land for inheritance tax purposes, provided the land has been used for agricultural purposes for at least two years before the transfer to the trust. It is essential to ensure that the farm continues to qualify for APR and BPR by maintaining its agricultural use and meeting other statutory requirements. Regular reviews of the farm’s activities and tax status can help ensure ongoing compliance.

Addressing the Unique Challenges of Blended Families

Blended families face unique challenges when it comes to estate planning. Here are some considerations specific to blended families and how an agricultural trust can help:

1. Balancing the Interests of Different Family Members

In a blended family, there may be different expectations about inheritance, especially if there are children from previous relationships. An agricultural trust can help balance the interests of various family members by clearly defining who will benefit from the trust and how the assets will be managed.

For example, a life interest trust can ensure that your spouse has the right to live on the farm during their lifetime while ultimately passing the property to your children. This arrangement can help prevent disputes and provide reassurance to all family members.

2. Avoiding Potential Claims on the Estate

If your estate plan does not make adequate provision for a spouse or children, they may be able to make a claim under the Inheritance (Provision for Family and Dependants) Act 1975. Setting up a trust can reduce the likelihood of such claims by providing for all dependants in a fair and considered manner. A well-drafted trust deed can specify the terms under which beneficiaries receive support, thereby helping to prevent disputes.

3. Ensuring Long-Term Management of the Farm

For many blended families, maintaining the farm as a viable agricultural business is a priority. An agricultural trust can include provisions that outline how the farm should be managed and by whom, ensuring continuity in operations. Trustees can be given guidelines on running the farm, including decisions related to leasing land, reinvesting profits, or selling assets.

Compliance Considerations for Agricultural Trusts

To ensure that your agricultural trust remains compliant, it is important to:

• Register the Trust with HMRC: All trusts, including agricultural trusts, must be registered with HM Revenue & Customs through the Trust Registration Service. This ensures transparency and compliance with anti-money laundering regulations.
• Review the Trust Regularly: Family circumstances, tax laws, and agricultural practices may change over time, so it’s important to review the trust regularly to ensure it remains compliant and relevant.
• Meet Tax Reporting Obligations: Trustees are responsible for any tax liabilities associated with the trust, including filing returns and paying taxes. Working with a tax advisor can help navigate these complexities.

Conclusion

Agricultural and farming trusts can provide an effective way to secure your farm’s future, protect your family’s interests, and ensure a smooth transition of ownership across generations. For blended families, trusts offer the flexibility and control needed to address diverse needs and protect the farm from potential disputes.

How we can help

We have a proven track-record of helping clients create Trusts. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact Our Wills and Probate Solicitors

It is important for you to be well informed about the issues and possible implications of creating a Trust. However, expert legal support is crucial in terms of ensuring your wishes are met as you would want them to be.

To speak to our Wills and Probate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Blog, News Tagged as

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