Mr & Mrs P are Somerset farmers who instructed Clarke Willmott to assist with Mr P’s estate.
- Mr P died and by his Will left his entire estate to his wife. As by Mr P’s Will his estate would pass to Mrs P free of inheritance tax (“IHT”), no claim for agricultural property relief “APR”) could be submitted.
- For years Mr & Mrs P had been in a farming partnership and latterly they had been joined in the partnership by their son (A).
- Whilst there was a partnership agreement the land owned by the partnership was in a combination of names, Mr P, Mr & Mrs P, the partnership, and Mr P’s late father.
- On Mr P’s death his interest in the farming business was valued at approximately £2 million.
- Whilst by Mr P’s Will his estate would pass to Mrs P free of inheritance tax (“IHT”); no claim for agricultural property relief (“APR”) would be submitted thus potentially losing the opportunity to pass on the farm to A and B free of IHT.
- At the first meeting with the family we advised them to obtain full valuations of Mr P’s farming interests so that the potential APR claim could be assessed.
- At that meeting it also became clear that A, who had been working alongside his parents for years, had hoped to inherit from his father now as he had plans to expand the farm and take on further borrowing which he felt should be in his sole name so as not to further burden his mother.
- When the varying land ownership became apparent we involved one of our colleagues in Clarke Willmott’s Agricultural Team who put together a full breakdown of the land, which included a combination of registered and unregistered land together with tracing documentation for deeds which it had previously been understood were “missing”.
- We discussed the potential for Mrs P to enter into a Deed of Variation of Mr P’s estate to effectively re-draft his Will to secure APR, pass the land onto A and also to make provision for the couple’s other son; B.
- We also advised on the benefits of documenting partnership property to maximise claims for business relief (“BR”) going forward.
- An all encompassing Deed of Variation was drafted to pass land direct onto both A and B. The Deed of Variation also included 2 trust structures to safeguard Mrs P’s occupation of the farmhouse for the remainder of her lifetime and also to pass on a non agricultural property to B whilst still enabling Mrs P to receive the income from this property.
- The value of Mrs P’s estate has been reduced to be hopefully within the combination of her own nil rate band and that which will transfer from Mr P’s estate. This means that there should be no IHT to pay on her death.
- Full APR/BR claims have been submitted which, when accepted by H M Revenue & Customs, will enable £2 million worth of assets to be passed on free of IHT.
- All of the land owned by the family will now be fully registered with the Land Registry.
- An updated Partnership Agreement and Declaration of Trust have been prepared to fully evidence ownership of the partnership property which will maximise claims for BR in the future.
- The continuation of the farming business for Mrs P, A and A’s family has been secured.