When it comes to safeguarding agricultural and farming assets, ensuring family succession, and planning for the future, trusts are among the most effective tools available. However, not all trusts are created equal, and choosing the right type depends on your unique circumstances and goals. Two popular options are agricultural and farming trusts and revocable trusts.
Each type offers distinct benefits and limitations, so understanding their key differences is essential. At Blackstone Solicitors, we work with clients across England and Wales to craft bespoke trust solutions tailored to their needs. In this article, we’ll explore how these two trust types compare and help you identify which might best suit your situation.
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What Are Agricultural and Farming Trusts?
Agricultural and farming trusts are designed specifically for individuals or families with farming assets, including farmland, buildings, equipment, and businesses. These trusts aim to preserve the farming legacy, ensure continuity, and manage tax liabilities effectively.
Key Features of Agricultural and Farming Trusts:
- They can protect assets from being sold outside the family.
- They provide flexibility in distributing income and assets among beneficiaries.
- They are structured to maximise tax reliefs, such as Agricultural Property Relief (APR) and Business Property Relief (BPR).
- They protect assets from risks such as divorce settlements or creditors.
These trusts are tailored to support the unique challenges and opportunities of managing agricultural wealth over the long term.
What Are Revocable Trusts?
A revocable trust (also known as a living trust) is a flexible legal arrangement that allows the settlor (the person creating the trust) to retain control over the trust assets during their lifetime. Unlike most other trusts, the settlor can amend or dissolve the trust at any time while they are alive and mentally capable.
Key Features of Revocable Trusts:
- The settlor can act as a trustee and beneficiary, maintaining control over the assets.
- The trust can be easily modified or terminated to adapt to changing circumstances.
- On the settlor’s death, the trust becomes irrevocable, and the assets are distributed according to the terms of the trust deed.
Revocable trusts are popular for general estate planning but are less specialised than agricultural and farming trusts.
Key Differences Between Agricultural and Farming Trusts and Revocable Trusts
Let’s examine how these two trust types differ across key areas:
- Purpose and Scope
- Agricultural and Farming Trusts:
These trusts are highly specialised, focusing on the needs of farming families. They aim to preserve agricultural assets for future generations while ensuring operational continuity. They also offer flexibility in addressing specific challenges, such as accommodating family members actively involved in farming while providing for non-farming beneficiaries. - Revocable Trusts:
Revocable trusts are broader in scope and not specifically tailored to farming or agricultural assets. Their primary purpose is to provide a flexible framework for managing assets during the settlor’s lifetime and ensuring a smooth transfer of wealth after death, avoiding the probate process.
- Control Over Assets
- Agricultural and Farming Trusts:
The settlor typically relinquishes direct control over the assets, which are managed by trustees. This arrangement ensures that the trust operates independently and protects the assets from personal financial risks. The settlor can, however, influence the trust’s terms and specify how assets should be managed or distributed. - Revocable Trusts:
The settlor retains complete control over the trust assets during their lifetime, acting as trustee or appointing others while maintaining the right to modify or revoke the trust. This level of control is ideal for individuals who want flexibility but can be less effective for protecting assets from external claims.
- Tax Efficiency
- Agricultural and Farming Trusts:
One of the key benefits of agricultural and farming trusts is their ability to take advantage of significant tax reliefs. For instance:
—Agricultural Property Relief (APR): Provides up to 100% relief from Inheritance Tax (IHT) on qualifying agricultural property.
—Business Property Relief (BPR): Offers relief on trading assets, including farm equipment and shares in a farming business.
These reliefs can drastically reduce the tax burden, ensuring the farm remains viable for future generations.
- Revocable Trusts:
Revocable trusts are less tax-efficient. During the settlor’s lifetime, the trust assets are considered part of their estate for IHT purposes. Although revocable trusts simplify estate administration and avoid probate, they do not offer the same tax advantages as agricultural and farming trusts.
- Asset Protection
- Agricultural and Farming Trusts:
Assets held in an agricultural and farming trust are shielded from certain risks, such as creditors, divorce settlements, or poor financial management by beneficiaries. Trustees can make decisions to safeguard the assets and ensure they are used responsibly. - Revocable Trusts:
Since the settlor retains ownership and control of the assets during their lifetime, they remain vulnerable to creditors, divorce claims, or legal disputes. This lack of protection can be a significant drawback for individuals seeking to preserve their wealth.
- Flexibility
- Agricultural and Farming Trusts:
While these trusts are highly adaptable in terms of distributing income and assets, they are not designed for easy modification or dissolution. Once established, the trust terms are generally fixed, although trustees can exercise discretion within the scope of the trust deed. - Revocable Trusts:
Flexibility is one of the defining features of revocable trusts. The settlor can amend, revoke, or dissolve the trust at any time, making them ideal for those who want to maintain control and adapt to changing circumstances.
- Administration Requirements
- Agricultural and Farming Trusts:
These trusts require active management by trustees, who must comply with legal and tax obligations, such as filing trust tax returns and maintaining records. The complexity of managing agricultural assets may also necessitate professional advice. - Revocable Trusts:
During the settlor’s lifetime, administration is typically straightforward, especially if the settlor acts as trustee. However, after the settlor’s death, the trust becomes irrevocable, and administration may become more complex.
Which Trust Is Right for You?
Deciding between an agricultural and farming trust and a revocable trust depends on your goals, assets, and family circumstances.
Consider an Agricultural and Farming Trust if you:
- Own significant agricultural assets, such as farmland, livestock, or a farming business.
- Want to ensure the farm remains operational and within the family.
- Need to minimise Inheritance Tax or Capital Gains Tax liabilities.
- Seek long-term protection for your assets against external risks.
Consider a Revocable Trust if you:
- Prioritise flexibility and control during your lifetime.
- Want a simple way to manage non-agricultural assets and avoid probate.
- Are not primarily concerned with tax reliefs or asset protection.
- Need a trust that can adapt to changing personal or financial circumstances.
How Blackstone Solicitors Can Help
Choosing the right trust is a critical decision that requires expert advice. At Blackstone Solicitors, we specialise in helping clients across England and Wales navigate the complexities of trust law and estate planning. Whether you’re safeguarding a farming legacy or seeking a flexible solution for wealth management, we provide:
- Bespoke advice tailored to your specific circumstances.
- Assistance with trust creation, including drafting trust deeds and transferring assets.
- Ongoing support for trust administration and compliance.
Conclusion
Both agricultural and farming trusts and revocable trusts have their advantages, but they serve different purposes. Agricultural and farming trusts are highly effective for protecting and preserving farming assets over the long term, offering tax efficiency and asset protection. Revocable trusts, on the other hand, provide flexibility and control, making them suitable for broader estate planning needs.
At Blackstone Solicitors, we’re committed to helping you choose the trust that best aligns with your goals and circumstances. Contact us today to discuss your estate planning needs and take the first step in securing your legacy.
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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