Putting your House in Order with Wills and Powers of Attorney
Ensuring you have up to date Wills and powers of attorney is essential for all farmers. The key to succession planning is working with your professional advisors to make sure that you can achieve your wishes so that your farming business passes to the people you choose, as tax effectively as possible.
A straightforward Will may be suitable, but equally it may be that a discretionary trust should be set up in your Will. This then means that after your death, your Executors can take advice, take into consideration the then tax laws, and distribute your estate to your chosen beneficiaries. The choice of your Executors is key, as you are leaving them a very important task to do. It is helpful to leave a detailed letter of wishes for them to follow. Discretionary Trust Wills are often used when a farmer has property which may qualify for Business Property Relief (BPR) and Agricultural Property Relief (APR) to reduce or eliminate the inheritance tax bill.
In addition to BPR and APR, each individual has an IHT nil rate band, currently £325,000, which can be left free of IHT. If a married couple leave their estates to each other, then the nil rate band of the first to die is also transferred to the widow or widower, meaning that a total of £650,000 can then be left free of IHT on the second death. In addition, since last April we now have the Residential Nil Rate Band which is an additional allowance of £125,000 which can be left free of IHT. The interplay between all the different IHT reliefs is complicated, so it is important to take professional advice if you are making a Will or are an Executor faced with administering a farming estate.
If you were to lose mental capacity due to old age, an accident or illness it would be important that you had created a power of attorney so that people you trust could an step in and run your farming business. You can create separate powers of attorney to deal with decisions about your health and wellbeing, about your personal finances and about your business. If you did not have a power of attorney when you lost mental capacity, it would be necessary for your family or business partners to go to Court to get authority to deal with your affairs. That would be slow and expensive, and it is much better to avoid that by putting one or more powers of attorney in place early on.