MANY farmers are concerned about the significant changes announced to Inheritance Tax (IHT) legislation and what this could mean for their families and themselves. With this in mind, it is important that you begin to take the first steps to put yourselves, and your families, in the best position.
When planning the succession of your business and the gifting of assets, it shouldn’t be purely about tax efficiency. It should be firstly about what you want to do for yourself and your family. You can then fit your plans within the tax legislation and new rules. Consider what your assets are, who you want them to go to and your family’s input and wishes. You’ll also need to look at what your current will says, your current partnership agreement, and consider when you might retire from the farm and how much you’ll need to live on.
It’s important to start the process now, but to wait until the final details of the legislation are known before putting your plans in place.
Protecting the next generation
Life insurance can be a valuable tool for those in their 30s, 40s or 50s, who are not ready to gift assets to their children. It is an effective way of providing a fund for inheritance tax should anything unexpected or tragic happen, rather than your beneficiaries having to sell off the farm. Older landowners, who are giving land away, would only need life cover for seven years until gifts they have made drop out of IHT.
In situations where children don’t want to take on the farm, parents need to decide if and when they would like to retire. Options here include selling the farm, renting it out or entering into a joint venture with another farmer. Alternatively, you can give parts of the farm to non-farming children to help save on IHT. Just because the next generation doesn’t want to farm, it doesn’t mean they can’t be involved in the succession and IHT planning. These decisions require very careful thought. By going through the thought process while waiting for the details of the proposals to be confirmed as law, you can then act accordingly. It is important to know your facts, figures and aspirations for the future as this will ensure you put yourself in much better position.
If you would like advice and support from our agricultural team, please get in touch. Call 01387 955900 or email [email protected].
