Conditional legacy of Agricultural Property

Trusts Discussion
1

I have been given a tricky request by some clients who want to even up the distribution of their estate. It is the standard farming family issue. I have drafted a clause, attached below, which I think is very messy but I hope will explain what I am trying to do. X are the farming children and Y are the non-farming children. Any comments on all the issues this throws up would be very welcome. Thank you

‘If X and X pay to each of their siblings Y, Y and Y or their respective administrators as the case may be the sum of £200,000 then I give all the agricultural property I own at the date of my death which qualifies for Agricultural Property Relief under the Inheritance Tax Act 1984 but subject to any mortgage or charges subsisting on it at the date of my death to my sons X and X in equal shares. The receipt of Y, Y, Y or their respective administrators will discharge my Executors. But if X or X or both of them cease farming within 20 years of the date of my death then the farm or the net proceeds of sale thereof will revert to back to my Executors to be transferred as to 50% to X and X in equal shares absolutely and as to the remaining 50% to Y, Y and Y in equal shares absolutely.’

Thanks for your input.
Lorraine

2

Well, this is fun.

On the first issue, payment of £200,000, would it be neater to charge the agricultural property with the payment of the legacy? Otherwise, the gift is conditional, and if X and X have difficulty in coming up with the money, the testator’s intention may be frustrated. A simple payment of £200,000 probably ought to have a time limit attached to it, otherwise there may be uncertainty about whether there has been a failure to meet the condition.

On the second issue, it looks as though you are creating a defeasible fee (or perhaps a fee determinable on a condition subsequent). Is the determining event sufficiently certain? What does it mean to be “farming”? If the property attracts APR, would it be easier to carry out the intention under a settlement and allow the trustees to decide whether the condition has been met?

Looking forward to seeing other replies.

Josh Lewison
Radcliffe Chambers

3

Thanks Josh, your comment has reflected some of my concerns. I think the charge would be much better, you are right. The 20 year issue needs more thought. Thanks again