There are a myriad of blogs and articles out in the ether about inheritance tax (IHT), agriculture property relief, business relief and capital gains tax when it comes to farm succession planning.
Putting aside the tax implications and how they might change in the future, what about the simple question of a fair split of the farming business assets to the next generation on death?
So, what are the options?
Should the assets be split equally?
This can lead to significant conflict. The farming son or daughter might have to buy or rent land from non-farming siblings and the non-farming siblings may feel obliged to keep an illiquid asset to keep the peace and not break up the farm when they might prefer to have access to the capital. Would the farm continue to be viable if land needs to be rented or bought? What if the non-farming siblings decide to rent or sell to someone else?
Should it pass entirely to those who have worked the farm all their lives?
This again, can result in significant family conflict – is it fair? Well depending on what side of the inheritance you’re on will determine your thoughts on whether it’s fair or not.
Non-farming assets going to non-farming children.
This can work well, provided there are sufficient non-farming assets to pass on to ensure this is morally equitable, if not financially equitable. There is a way that you can pass the farming assets onto the farming children and still ensure the non-farming children recieve a fair inheritance, even without sufficient non farming assets. By taking out a life assurance plan that lasts for the rest of your life, in trust, for the benefit of non-farming children a known level of inheritance can be passed on. This ensures that they receive a lump sum of money, paid out very quickly, post death for them to do what they like with. This allows the farming business to be passed on, intact, retaining ongoing viability and avoiding potential sibling conflicts. In most circumstances the proceeds paid out via a trust would be free of IHT.
Please get in touch with a financial planner in your local office to discuss how you can make informed decisions about your financial future.
