What Are The Costs Involved In Setting Up An Agricultural And Farming Trust?

An agricultural or farming trust is a legal arrangement where the ownership of farming assets—such as land, buildings, livestock, and machinery—is transferred to trustees. The trustees manage these assets on behalf of the beneficiaries, who may include family members or other individuals. This structure can provide a range of benefits, including inheritance tax efficiency, protection against claims from creditors, and a structured approach to succession planning.

While the benefits are significant, there are costs involved in setting up and maintaining the trust, which should be considered carefully.

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Legal Fees for Setting Up the Trust

The primary cost associated with setting up an agricultural or farming trust is the legal fees for drafting the trust documents and providing legal advice. The fees can vary based on several factors:

1. Complexity of the Trust Structure: If the trust involves multiple farming assets, various types of beneficiaries (e.g., children, grandchildren, or extended family members), or special conditions (such as providing for a spouse’s lifetime interest), the legal fees may be higher. More complex cases often require a detailed review of the estate and additional legal work to draft a tailored trust deed.
2. Specialist Advice on Agricultural Law: Agricultural trusts involve specific legal considerations, such as qualifying for Agricultural Property Relief (APR) or Business Property Relief (BPR). Solicitors who specialise in agricultural law can provide the expertise needed to navigate these complexities, but their fees may be higher than those of general practitioners due to their specialist knowledge.
3. Choice of Solicitor or Law Firm: Different solicitors or law firms charge varying fees depending on their experience, location, and reputation. While opting for a more affordable solicitor may seem tempting, it is important to choose a firm with experience in agricultural trusts to ensure the trust is set up correctly.

Estimated Cost: Legal fees for setting up an agricultural or farming trust can range from £1,500 to £5,000 or more, depending on the factors mentioned above. More complex estates or trusts with intricate structures may incur fees upwards of £10,000.

Valuation Fees for Farming Assets

When setting up an agricultural trust, it is important to obtain accurate valuations for the farming assets that will be included in the trust. This may involve valuing farmland, buildings, machinery, livestock, and other assets. Valuations are necessary for several reasons:

1. Inheritance Tax Planning: The valuation of agricultural assets is critical for determining potential inheritance tax liabilities and ensuring that the estate qualifies for reliefs such as APR and BPR.
2. Establishing the Value of Trust Assets: Accurate valuations are needed to ensure the trust deed reflects the true value of the assets being transferred into the trust, which is important for both legal and tax purposes.
3. Dividing the Estate Among Beneficiaries: In cases where there are multiple beneficiaries, valuations help ensure that assets are distributed fairly according to the settlor’s wishes.

Estimated Cost: Valuation fees can vary depending on the type of asset being valued and the professional providing the valuation. For example, the cost to value farmland may range from £500 to £2,000, while valuing livestock, machinery, or other assets may incur additional costs. In some cases, multiple valuations may be required, increasing the overall expense.

Trustee Fees

Once the trust is established, trustees will need to manage the trust’s assets in accordance with the trust deed. Trustees may be family members, professional trustees, or a combination of both. The costs associated with trustee services depend on the type of trustee chosen:

1. Family Members as Trustees: If family members are appointed as trustees, there may not be any direct cost associated with their role. However, they will still have responsibilities such as keeping accurate records, managing the trust’s assets, and ensuring compliance with legal requirements. This may involve additional administrative costs.
2. Professional Trustees: If professional trustees are appointed, they will typically charge fees for their services. Professional trustees, such as solicitors or trust companies, bring valuable expertise and can help manage complex estates. However, their fees will vary depending on the level of involvement required and the value of the assets under management.

Estimated Cost: Professional trustee fees may range from 0.5% to 1.5% of the value of the trust’s assets per year, or they may charge a flat annual fee. For a trust with significant assets, this can result in annual fees ranging from a few hundred pounds to several thousand pounds.

Tax Planning and Accountancy Fees

Trusts are subject to various tax rules, including inheritance tax, capital gains tax, and income tax. Ensuring that the trust is set up in a tax-efficient manner requires careful planning, which may involve seeking advice from tax specialists or accountants. Tax planning services can help you maximise reliefs, structure the trust effectively, and avoid potential tax pitfalls.

Estimated Cost: Tax planning and accountancy fees for setting up an agricultural trust may range from £500 to £2,000 or more, depending on the complexity of the estate and the level of tax advice required. Ongoing accountancy fees may also be incurred if regular tax returns are needed.

Ongoing Trust Administration Costs

In addition to the initial costs of setting up the trust, there are ongoing expenses associated with administering the trust. These may include:

1. Annual Tax Returns: Trusts are typically required to file annual tax returns, which may involve accountancy fees.
2. Maintenance of Trust Assets: If the trust holds agricultural land or buildings, there may be costs associated with maintaining the property, such as repairs, insurance, or legal fees related to tenancy agreements.
3. Trustee Meetings and Administration: Ongoing administrative tasks, such as organising trustee meetings, keeping records, and communicating with beneficiaries, may incur costs, especially if professional trustees are involved.

Estimated Cost: The ongoing administration costs for an agricultural trust can vary significantly, depending on the value of the assets, the type of trustees involved, and the level of administration required. Annual administration costs may range from £500 to £3,000 or more.

Other Potential Costs to Consider

There are several other potential costs that may arise during the process of setting up and managing an agricultural or farming trust:

1. Dispute Resolution Fees: If there are disagreements among beneficiaries or trustees, legal fees may be incurred to resolve disputes. Mediation or court proceedings can be costly, depending on the nature of the conflict.
2. Amendments to the Trust Deed: Changes to the trust deed may be necessary over time due to changes in family circumstances, tax laws, or farming practices. Legal fees will be incurred if the trust deed needs to be amended.
3. Specialist Advice on Agricultural Subsidies or Grants: If the farm benefits from agricultural subsidies or grants, it may be necessary to seek specialist advice to ensure compliance with subsidy regulations when transferring ownership to the trust.

How to Minimise the Costs of Setting Up an Agricultural Trust

While the costs associated with setting up an agricultural or farming trust can add up, there are ways to minimise expenses:

1. Plan Early: Planning ahead allows more time to consider your options and ensures that the trust is set up in the most tax-efficient way. Early planning can also help avoid the need for expensive changes later.
2. Choose the Right Professionals: Working with experienced solicitors who specialise in agricultural trusts can help you avoid costly mistakes. At Blackstone Solicitors, we provide expert advice tailored to your unique circumstances, ensuring that the trust is set up correctly from the outset.
3. Review and Update the Trust Regularly: Regular reviews can help ensure that the trust continues to meet your objectives and is structured in a way that minimises costs. Proactively addressing changes can prevent future legal or tax complications.

Conclusion

Setting up an agricultural or farming trust involves various costs, from legal fees and valuations to ongoing administration and tax planning. Understanding these costs can help you budget effectively and make informed decisions about the best way to protect your farming legacy.

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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