Farm Businesses And Wills And Tax Planning

When you write your will it is important to be sure who owns the land and buildings used by your farm business. Ownership will affect the inheritance of your assets and the tax charged on your death.

It is common for the farm land and buildings to be owned by an individual partner and made available to the partnership. When that partner dies the value of the land and buildings form part of their estate for inheritance tax (IHT) purposes and IHT may be charged.

Agricultural relief from IHT may apply but not to the whole value. For example, there may be development or hope value which does not qualify for the agricultural property relief.

To the extent that agricultural property relief is not available then business property relief may be claimed. However, that business property relief will be restricted to 50% if the land is owned by you and not by the business.

It would be good IHT planning to move the land and buildings into the partnership to obtain 100% business property relief. However, in doing that the land and buildings are dropped into the pot for what is known as legal rights.

Legal rights are the right of a spouse or children to take a share of the value of your estate on death. Land and buildings are protected from this, but not if they are in a business. If you have chosen an heir to the business then other family members can claim legal rights and cut across your will. The business may need to take on...