Estate planning for farmers is essential for safeguarding the future of your family home and business. It’s not solely a question of how best to ease into retirement, it’s also a practical decision about how your farm will continue to operate in the years to come.

This article outlines how best to create farming succession plans and the benefits and challenges involved. We’ll also look at partnership agreements, the importance of tax planning for farmers, and dividing farms between siblings, so you have all the information you need to make informed decisions.

The steps to estate planning for farmers

Succession planning is a complex undertaking that often requires assistance from a range of legal disciplines. To create an all-encompassing succession plan you might need to consider factors like ownership of farming assets, tax planning for farmers, which assets certain family members will inherit, and your long-term business goals.

Here are the main steps to be considered ahead of formalising your estate plan in a will, trust, or other agreement:

Speak with family first

Before exploring the intricacies of an estate plan, it’s advisable to first speak with your family. Include anyone who is likely to be affected by your decisions and explain your ambitions to them. It’s important to establish which family members actually want to be involved in the future running of the farm before you commit to a plan of action.    

Similarly, are you planning on dividing a farm between siblings? If so, think about what to pass on to both the future farmers and non-farming relatives. This will help to clarify who receives farm assets as part of their inheritance and who receives other privately-owned possessions.

Identify and value farm assets 

It’s important to take a full inventory of farm assets at the start of the process. Clearly define who owns all necessary equipment and machinery and remember to document if there are any other claims to them. When identifying and valuing all farm assets you will need to remember to include everything from buildings to the land itself.

Draft a will or trust

Wills and trusts are often essential parts of estate planning for farmers, as they can ensure that your possessions are passed on following your wishes. A will practitioner will require a comprehensive account of your assets and surrounding circumstances. The will itself will show the executors, the intended beneficiaries, and contingency plans. The way your will/trust is structured can also help to reduce the burden of inheritance tax and take advantage of any available business and/or agricultural reliefs. 

Consider the importance of tax planning for farmers

Thorough tax planning can help you to benefit from all available reliefs while also minimising tax. In this respect, inheritance tax planning can be crucial for UK farmers. Agricultural Relief and Business Relief can reduce tax burdens on your loved ones. 

Agricultural Relief applies to farming assets like land and buildings and offers up to 100% relief. Meanwhile, Business Relief can reduce taxes on any qualifying business assets. It’s worth noting that the timing of gifts can also play an important role in reducing taxes. Any gifts made within seven years of your death may still prove to be taxable, so it’s important to take a long-term view. 

Finally, it’s important to enlist professional advice regarding estate planning for farmers. When done correctly, it’s possible to safeguard assets and give the best possible chance of a clean, hassle-free transfer to your beneficiaries.

What are the benefits of estate planning for farmers?

There are countless benefits to comprehensive estate planning. Not only will you ensure that your legacy ends up in the right hands but you can also safeguard it against divorce or bankruptcy and ensure a smoother transition between the current and future ownerships.

The advantages of estate planning for farmers include:

  • Preservation of your legacy: Farms are much more than just businesses, they’re often treasured family assets that have been passed down over many years. Preserving this legacy for future generations is often a vital consideration.
  • Question of Trust: Uncertainty over the future of an estate can cause disruption and disputes between family members. Wills and trusts have a clear framework regarding the division of assets that can minimise the chances of them being contested.
  • Give farm assets better legal protection: Not only can trusts and wills help with tax planning, but they can also protect valuable assets from legal challenges such as bankruptcy and divorce.
  • Take care of loved ones: Comprehensive estate planning can ensure that loved ones are provided for, any pre-existing debts are settled and any vulnerable dependents get the care they need in the future.
  • Tax and relief: As discussed earlier, tax planning for farmers can help to reduce your tax liabilities and take advantage of factors like Agricultural Relief and Business Relief.

Ultimately, estate planning is a proactive option to help protect your assets, provide for your loved ones in the years to come, and make sure that your farming business has continuity in your absence.

What are the challenges? 

Farmers face some unique challenges when it comes to estate planning. This is primarily down to the nature of their assets and the complexities of operating agricultural businesses:

  • Dividing a farm between siblings: As discussed, not all siblings may want to be involved in the long-term running of the farm. Additionally, the division of such high-value assets can lead to inheritance disputes between family members.
  • Asset valuation: Fluctuating prices can make it difficult to appraise assets like land, crops, and livestock.
  • Consider farming partnerships: Farming partnerships must be given full consideration. Pre-existing farm partnerships and share agreements might even need to be amended for a will or trust to be effective.
  • Accounting for diversified assets: Increasingly popular sources of income, all diversified assets will need to be accounted for in an estate plan.
  • Business structure: The choice of business structure, be it as a sole trader, partnership, or limited company, will impact how assets are distributed and taxed.
  • Debts and liabilities: Ensuring that debts and liabilities are addressed might be necessary to ensure the long-term viability of your farming business.

Overcoming these challenges requires working closely with experienced professionals who can help you navigate the process of estate and tax planning for farmers. Consulting with specialist solicitors ensures you can develop comprehensive strategies that protect your assets, provide for your loved ones, and ensure the continued success of your farming business.

Planning for the future of your farming estate

When considering the future of your farming estate, seeking professional advice is essential. We specialise in the agricultural sector while offering a full range of legal and professional services to address all your needs. Our interconnected team brings a wealth of experience, providing reliable guidance to help farmers divide their estates according to their wishes. 

We take pride in creating comprehensive, personalised plans tailored to your specific circumstances. Our experts can assist with every aspect of estate planning, including wills and trusts, tenancy and property arrangements, partnership agreements, and preparing for inheritance and capital gains tax. Everything we do is focused on ensuring your goals are met. 

Contact us today to learn more about how we can help you secure the future of your estate.