Trusts are a versatile and effective way to manage and protect assets, ensuring that your wishes are carried out, and your beneficiaries are cared for. Two common types of trusts that people encounter are agricultural and farming trusts and charitable trusts. While both involve the careful management of assets, their purposes and legal structures differ significantly.
At Blackstone Solicitors, we have extensive experience helping clients across England and Wales navigate the complexities of trust law. In this article, we’ll break down the key differences between agricultural and farming trusts and charitable trusts, helping you better understand which trust type might be suitable for your circumstances.
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What Are Agricultural and Farming Trusts?
Agricultural and farming trusts are specifically designed to manage, protect, and preserve farming assets such as land, livestock, machinery, and business operations. These trusts are tailored to meet the unique needs of farming families, ensuring that farms can remain operational and within the family for generations.
Key Features of Agricultural and Farming Trusts
- They protect and preserve agricultural assets such as farmland and farm equipment.
- Trustees manage the trust assets according to the settlor’s (creator’s) wishes, often balancing the needs of farming and non-farming beneficiaries.
- These trusts can take advantage of specific tax reliefs like Agricultural Property Relief (APR) and Business Property Relief (BPR), which can reduce Inheritance Tax (IHT) liabilities.
- They provide long-term protection, ensuring that the farm is safeguarded from risks like divorce settlements, creditors, or mismanagement.
Agricultural and farming trusts are a powerful tool for estate planning, particularly for families with substantial agricultural holdings who want to preserve their legacy.
What Are Charitable Trusts?
Charitable trusts are established to benefit a cause or group of people, rather than to directly provide for family members. The assets placed in a charitable trust are used to fund charitable activities or organisations in line with the settlor’s chosen objectives.
Key Features of Charitable Trusts
- The trust must have a charitable purpose, such as the advancement of education, religion, or the relief of poverty.
- Charitable trusts must meet legal requirements under the Charities Act 2011 in England and Wales.
- They are eligible for certain tax exemptions, including relief from Income Tax, Capital Gains Tax, and Inheritance Tax.
- Trustees are responsible for ensuring that the trust assets are used solely for charitable purposes.
Charitable trusts are ideal for individuals or families who wish to leave a philanthropic legacy or support causes close to their hearts.
Key Differences Between Agricultural and Farming Trusts and Charitable Trusts
- Purpose and Beneficiaries
- Agricultural and Farming Trusts:
These trusts are created to protect farming assets and provide for family members or other specified beneficiaries. They focus on ensuring the continuity of the farm, balancing the interests of those who are actively involved in farming with those who are not. - Charitable Trusts:
Charitable trusts, on the other hand, are exclusively designed to benefit a public cause or group of people. The beneficiaries are not family members or individuals but rather those who qualify under the charitable purpose defined by the trust.
- Tax Implications
- Agricultural and Farming Trusts:
Agricultural and farming trusts offer significant tax benefits for farming families. Key reliefs include:
—Agricultural Property Relief (APR): Up to 100% relief on qualifying agricultural property, which can greatly reduce IHT.
—Business Property Relief (BPR): Relief on trading assets, such as machinery or shares in a farming business, which can also reduce IHT.
These reliefs make agricultural and farming trusts a vital tool for families looking to transfer farming assets without incurring prohibitive tax liabilities.
- Charitable Trusts:
Charitable trusts enjoy extensive tax exemptions, including:
—Relief from Income Tax and Capital Gains Tax on income and gains generated by trust assets.
—Full exemption from IHT for assets transferred into the trust.
These exemptions make charitable trusts particularly attractive for individuals or families who want to reduce the tax burden on their estate while supporting philanthropic causes.
- Legal and Regulatory Framework
- Agricultural and Farming Trusts:
These trusts are governed by general trust law, and their structure is flexible, allowing them to be tailored to the settlor’s specific wishes. The trust deed outlines how the assets are to be managed, and trustees have a fiduciary duty to act in the best interests of the beneficiaries. - Charitable Trusts:
Charitable trusts are subject to stricter regulations, including compliance with the Charities Act 2011. In England and Wales, they must register with the Charity Commission if their income exceeds £5,000. Trustees must ensure that all activities align with the charitable objectives of the trust.
- Asset Management and Use
- Agricultural and Farming Trusts:
The assets in an agricultural and farming trust are managed to preserve the farming operation and provide income or support to the beneficiaries. Trustees must balance competing interests, such as maintaining the farm’s productivity and distributing funds to non-farming beneficiaries. - Charitable Trusts:
Assets in a charitable trust are used exclusively to further the trust’s charitable objectives. This might involve funding specific programmes, supporting research, or donating to charitable organisations. The trustees must ensure that the assets are not used for personal benefit or purposes outside the trust’s stated goals.
- Lifespan and Continuity
- Agricultural and Farming Trusts:
These trusts are often designed for the long-term preservation of farming assets. They are particularly suited for multi-generational planning, ensuring that the farm remains within the family and continues to operate. - Charitable Trusts:
Charitable trusts can continue indefinitely as long as they fulfil their charitable purpose. They are not tied to family succession planning but instead aim to create a lasting philanthropic legacy.
- Control and Flexibility
- Agricultural and Farming Trusts:
The settlor has a high degree of control over the structure of the trust. The trust deed can specify how the assets should be managed, who the beneficiaries are, and the conditions under which distributions are made. - Charitable Trusts:
While charitable trusts provide some flexibility in terms of how funds are allocated to charitable causes, they are strictly bound by the trust’s charitable objectives and the regulations governing charities.
Which Trust Is Right for You?
Consider an Agricultural and Farming Trust if you:
- Own substantial farming or agricultural assets.
- Want to ensure the continuity of a family farm for future generations.
- Seek to minimise tax liabilities on farming assets through APR or BPR.
- Need to protect the farm from risks such as divorce, creditor claims, or mismanagement.
Consider a Charitable Trust if you:
- Wish to support a cause or charity that aligns with your values.
- Want to create a philanthropic legacy that benefits the public or a specific group of people.
- Seek significant tax exemptions for assets dedicated to charitable purposes.
- Are less focused on providing for family members directly through the trust.
How Blackstone Solicitors Can Help
At Blackstone Solicitors, we understand the intricacies of trust law and the importance of choosing the right structure for your needs. Our experienced team can assist with:
- Advising on the most suitable trust type based on your goals and assets.
- Drafting and establishing trust deeds tailored to your specific circumstances.
- Providing ongoing support for trust management and compliance.
- Navigating the tax implications of agricultural and charitable trusts.
Whether you are protecting a farming legacy or creating a charitable legacy, we are here to provide expert guidance every step of the way.
Conclusion
Agricultural and farming trusts and charitable trusts each serve distinct purposes and offer unique benefits. Agricultural and farming trusts are ideal for preserving and managing farming assets within a family, while charitable trusts provide a means to support philanthropic goals and create a public benefit.
At Blackstone Solicitors, we are dedicated to helping clients across England and Wales make informed decisions about their trust and estate planning. Contact us today to learn how we can assist you in achieving your objectives with confidence and care.
How we can help
We have a proven track-record of advising upon all aspects of private client work. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.to incorporate, what kind of ownership
How to Contact Our Private Client Solicitors
It is important for you to be well informed about the issues and possible implications of dealing with trusts. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Trust 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.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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