For many involved in farming and agriculture, the land, property, and businesses they own represent not just significant assets but also a legacy built over generations. Ensuring these assets are passed on according to your wishes, while safeguarding them from unnecessary tax liabilities or disputes, requires careful planning. Agricultural and farming trusts are one of the most effective tools for achieving this.
At Blackstone Solicitors, we specialise in providing tailored legal services to clients across England and Wales. In this article, we’ll explain how agricultural and farming trusts work, the benefits they offer, and how they ensure that your intentions are honoured.
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For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of Trusts and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
What is an Agricultural and Farming Trust?
A trust is a legal arrangement where one or more trustees hold and manage assets on behalf of beneficiaries. In the context of agriculture and farming, a trust can include farmland, farmhouses, agricultural machinery, livestock, and even farming businesses.
Key parties involved in a trust include:
- Settlor: The person creating the trust and transferring assets into it.
- Trustees: Individuals or institutions responsible for managing the trust according to the terms set out in the trust deed.
- Beneficiaries: Those who will benefit from the trust, either by receiving income or ultimately inheriting the assets.
Agricultural and farming trusts are particularly useful for ensuring that your wishes regarding these assets are respected while providing flexibility, control, and tax efficiency.
Why Set Up a Farming Trust?
There are several reasons why individuals choose to place farming assets into a trust:
- Ensuring Family Succession
For many farming families, keeping the farm within the family is of paramount importance. A trust allows you to stipulate how and when the assets are passed to the next generation. For instance, you might want to ensure that children who are actively involved in the farming business are prioritised.
- Avoiding Disputes
A clear trust structure can help prevent family disagreements by setting out your intentions unambiguously. Trustees act impartially, ensuring the trust is managed fairly and in line with your instructions.
- Protecting Beneficiaries
A trust can provide financial security for younger or vulnerable beneficiaries without giving them direct control over assets. This ensures that the assets are preserved and used responsibly.
- Tax Efficiency
Agricultural and farming trusts can help mitigate significant tax liabilities, such as Inheritance Tax (IHT) and Capital Gains Tax (CGT), provided they are set up correctly.
Types of Trusts for Agricultural and Farming Assets
There are several types of trusts that can be used to manage agricultural and farming assets. The most suitable type depends on your specific circumstances and goals.
- Discretionary Trusts
Discretionary trusts provide maximum flexibility, as trustees have the power to decide how income and capital are distributed among beneficiaries. This type of trust is ideal if you want to adapt to changing family circumstances or tax regulations.
- Life Interest Trusts
Life interest trusts provide income to a specific individual (known as the life tenant) during their lifetime. After their death, the remaining assets pass to the ultimate beneficiaries. This structure is often used to provide for a surviving spouse while preserving the farming assets for children.
- Bare Trusts
Bare trusts give beneficiaries an immediate and absolute right to the trust assets. While this approach has fewer administrative requirements, it lacks flexibility and may not be suitable for complex situations.
Each type of trust has its own advantages and limitations. Seeking professional advice is essential to ensure you choose the right structure for your needs.
How Trusts Protect Your Wishes
A properly structured agricultural or farming trust ensures that your intentions are clearly documented and legally enforceable. Here’s how trusts help ensure your wishes are carried out:
- Customised Terms
The trust deed specifies exactly how the assets should be managed and distributed. This can include detailed instructions, such as:
- Prohibiting the sale of farmland to non-family members.
- Allocating income to specific beneficiaries, such as grandchildren.
- Stipulating that the assets be used exclusively for agricultural purposes.
- Trustee Responsibilities
Trustees are legally bound to act in the best interests of the beneficiaries and in accordance with the terms of the trust. Appointing trustworthy and competent individuals as trustees ensures that your wishes are upheld.
- Long-Term Flexibility
Farming trusts can adapt to changing circumstances. For example, if a beneficiary develops a serious health condition or if the farming business faces financial challenges, trustees can adjust their approach to address these issues.
- Protection Against Creditors and Divorce
Trusts can protect farming assets from being divided in the event of a beneficiary’s divorce or being seized by creditors. This ensures that the assets remain intact and available for future generations.
Tax Benefits of Agricultural and Farming Trusts
One of the most significant advantages of farming trusts is their potential to reduce tax liabilities. Here are the key tax reliefs often associated with these trusts:
- Agricultural Property Relief (APR)
APR provides up to 100% relief from IHT on qualifying agricultural property, such as farmland, farm buildings, and farmhouses. To qualify:
- The property must have been used for agricultural purposes for at least two years if owned by the farmer or seven years if let out.
- The farmhouse must be proportionate in size and character to the farm.
By placing qualifying assets into a trust, you can ensure they benefit from APR, preserving their value for future generations.
- Business Property Relief (BPR)
If the farming operation involves a trading business, BPR can offer additional relief from IHT on qualifying assets. This can apply to farming machinery, livestock, and shares in farming companies.
- Capital Gains Tax (CGT) Efficiency
When transferring farming assets into a trust, CGT may apply if the value of the assets has increased. However, reliefs such as Hold-Over Relief can defer the CGT liability until the assets are sold or transferred out of the trust.
Challenges and Considerations
While farming trusts offer many benefits, they also come with responsibilities and potential challenges:
- Administrative Requirements
Trustees must comply with strict legal and tax obligations, including filing trust tax returns and maintaining detailed records. Professional advice can alleviate this burden.
- Changing Tax Rules
The government frequently reviews tax reliefs such as APR and BPR. Staying informed and reviewing your trust regularly is essential to ensure it remains tax-efficient.
- Choosing Trustees
Selecting the right trustees is crucial. They should be capable, impartial, and aligned with your long-term goals.
How Blackstone Solicitors Can Help
Setting up an agricultural or farming trust is a complex process that requires a thorough understanding of legal and tax implications. At Blackstone Solicitors, we offer a comprehensive service, including:
- Help in assessing your assets and family circumstances.
- Advising on the most suitable type of trust.
- Drafting a trust deed tailored to your wishes.
- Providing ongoing support with trust administration and compliance.
Our experienced solicitors take the time to understand your goals and ensure that your farming assets are managed in a way that reflects your vision for the future.
Conclusion
Agricultural and farming trusts are invaluable tools for ensuring your wishes are carried out, protecting your legacy, and minimising tax liabilities. However, they require careful planning and expert advice to set up and manage effectively.
At Blackstone Solicitors, we’re here to help you navigate this process with confidence. Whether you’re planning for the future of your farm, safeguarding your assets, or supporting future generations, our dedicated team is ready to assist. Contact us today to discuss your needs and find out how we can help you secure the future you envision.
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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