Our clients were a farming family who were keen to make sure that their farmhouse – their family home – and farmland would stay in the family, even after their deaths. They had two children: a son who had worked on the farm his whole life and still lived on site, and a daughter who’d chosen a different career and lived in her own property away from the farm.
Though our clients wanted to leave an inheritance for both of their children, they were particularly keen to secure the future of the farm as a continued livelihood for their son. They had decided to leave the farmhouse and the farm itself to him. There was another property on the farmland which they planned to leave to their daughter, but this would not be bequeathed with any rights over the farm itself.
The clients were keen to ensure these plans would be protected, whatever happened.
We recommended that the clients make wills that incorporated a life interest trust in relation to the farmhouse. This meant that if anything happened to one of them, the survivor could continue to live in the property. In order to do this, we had to apply to the HM Land Registry to change the ownership type of the couple’s property from ‘joint tenants’ to ‘tenants in common’. This meant they each had the right to leave their half of the property to whoever they chose, rather than ownership of the property automatically reverting to the surviving owner.
Once we had dealt with this, we were able to write new wills for our clients. They each chose to leave their half of the farmhouse and farm to their son, with the life interest trust ensuring the surviving spouse would be able to remain in the farmhouse for the rest of their life. The wills also left the second property on the farmland to their daughter.
The wills were accompanied by a comprehensive letter of wishes that explained why things had been set up in this way. It was important for the clients to include a letter of wishes as there was such an obvious discrepancy between the value of their two children’s inheritances. They believed this was fair due to the many years of work their son had invested in the farm, but setting this out formally in a letter was important in order to avoid misunderstandings or disputes after their deaths.
Finally, we advised our clients on Business and Agricultural Relief and how this would impact on the value of the farmland. We were able to confirm to our clients that there should be no liability for inheritance tax after both of their deaths due to the nature of the property as a working farm.