Concern about the future of the farm
We are often asked to help generations of the same farming family to deal with the succession of the farm – including the land itself and the business associated with it. We have recently acted for a married couple who required assistance with planning for the future of their family farm.
In this particular case, the couple asked us to act for them in connection with the preparation of their Wills incorporating life interest trusts in respect of the main family home. Our clients had very definite plans for the house and how they wanted it shared.
Preparation of Life Interest Trust Wills.
Peace of mind for clients knowing that farm will remain intact and be passed to the child who has always worked it.
How this helped
The couple advised us that they would like to structure the distribution of their estates so that on the first death, half of their main home passed to their daughter with the condition that the survivor could live there for the rest of his or her life.
This meant that least this half of the property was ear-marked for their daughter in the first instance, and would prevent the survivor from giving this half to someone else, either during his or her lifetime, or in his or her Will.
It would also prevent the whole of the value of the property from being taken into account, should the survivor require means tested residential care during his or her later years.
This is called a life interest trust or an interest in possession trust. It is a flexible vehicle, allowing the survivor to sell the property and, for example, downsize, but the capital from their respective half shares would be preserved for their daughter.
In addition to this, the new Wills provided that the clients’ respective interests in the farm would pass to their son on death, ensuring that it was able to remain in the family and that their son did not lose his livelihood.
Following this, on the first death, the residue of their estates (e.g. cash in the bank, investments etc.) would pass outright to the survivor. It would then be up to the survivor as to how the residue of the estate on the second death would be distributed.
As part of dealing with the life interest in one of the properties, we needed to check how the house was held – i.e. joint tenants or tenants in common (these are the two types of joint ownership of property in the UK).
One of the key aspects of the work we undertook for our clients was to ensure that their house was held as tenants in common so that they were each free to dispose of their half shares in their Will.
Otherwise, the house would pass outright to the surviving joint owner on death regardless of what the Will said. This is called ‘severing the tenancy’ and is an application to HM Land Registry. Life Interest Trusts are not only for farming or other large estates – they can be used on any property that you wish to ensure is left to your chosen beneficiaries.
It means that whilst you can’t guarantee what your co-owner will do with their share, you can at least ensure that your share of the property is safely in the hands of your chosen person or people.
If you need advice in relation to planning for the future or life interest trusts, then please do not hesitate to contact us and we will be happy to assist you.