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Trusts as an aid to bringing long term plans to fruition

View profile for Philip Nelson
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Trusts as an aid to bringing long term plans to fruition

Driving from Wass to Coxwold the other day, I noticed the ‘Welcome to Hambleton’ sign had disappeared. Not, as in the past, because someone had missed the bend but rather as a sign that the new North Yorkshire Council was slowly removing the old district boundaries.

One other area where the council (and potentially the new mayoral authority) will make a difference is in planning. Each local authority has a plan which sets out the areas that are available for development. Previously planning was handled by each district authority but now North Yorkshire is going through the process of calling for sites and considering its own overall strategic plan.This brings with it opportunities as the new authority covers a much wider area and therefore will potentially have a different approach to how it allocates sites across the region.

Now planning is not my expertise but it is a relevant topic in terms of succession planning. Agricultural land is often held by families on the basis that it could have a future development value. There is always a question of who should own the land and how to pass it on. Inheritance tax is often a top priority agricultural property relief is limited to agricultural value, therefore there can be an issue if land is included as development land as the value increases substantially. The obvious answer is to give it away but equally it can be difficult to decide who to.

It is an area where trusts can be particularly useful. A trust allows for the beneficial interest i.e. the current and future value to be transferred without changing the current legal owners or deciding who exactly is to benefit. Keeping control as trustees can be important as it allows the decisions on current land use and agreements with promoters or developers to stay with the current generation who know the land best.

Having discretion to decide who benefits from the proceeds can also be very useful – planning is often a long term project and the people who will benefit could be very young or not even born. A trust therefore allows for decisions to be made when the proceeds are ‘real’.

From an inheritance tax point of view, the gift is made at current market value, so any uplift is outside the estate, even if the person dies within 7 years, after 7 years it is completely clear of inheritance tax.  

As with all things tax, there are downsides – a gift once made cannot be taken back so you can no longer benefit from the land value. Trusts have to be administered and costs follow from that. However most often these costs are outweighed by the benefits.

Overall then the new council will bring with it new opportunities but before following them up it is sensible to consider them in the context of family and estate planning and taking advice as necessary. 


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