Making sure everyone gets their just entitlements
Q I am a farmer in my late sixties and have three children. We have a reasonably large farm and my wife and I are planning on making wills in case either one of us dies suddenly or becomes seriously ill. As we had a high stocking rate in the relevant years we have high value entitlements. How can we leave the land and entitlements in a way that looks after all of our children without complicating the management of the farm after we are gone?
Answer: After you have had a proper discussion with those family members affected by your plans for your estate, you should put together a basic plan and seek legal and financial advice about making a will.
Taxation is one of the biggest considerations for many farmers in planning for the transfer of a farm in a will. Inheritance tax stands at 33pc so it is essential to have a plan in place for minimising tax on the inheritance.
Look to agricultural relief requirements and business interest relief to maximise the tax relief. You will need to have identified an heir/s for the farm land before you get advice on the tax implications, including the tax free threshold that will apply.
If you plan to split the farm lands among more than one heir, you should consider that different rules apply to lands used as sites by heirs. Capital Gains Tax could apply in certain circumstances as well as inheritance tax.
In the case of splitting the land holding and entitlements, remember that the entitlements are not attached to the land and do not automatically transfer with land. It may well be that the entitlements could be transferred to one of your children while the land is transferred, in the majority to another child.
While this may leave the child inheriting the land with no entitlements, if s/he is eligible to do so, they could apply to the national reserve for entitlements on the land.
In the case of the child inheriting the entitlements, you should bear in mind that the entitlements have to be activated, ie the person who wishes to draw down payment, must declare one eligible hectare for each entitlement that he holds.