The Importance of a Power of Attorney
A Lasting Power of Attorney (LPA) is advised protection for succession planning, however for many it can be a useful tool for tax planning too.
If an individual has not made a lifetime gift of the farm to a member of their family as part of a succession plan already, to achieve full Inheritance Tax (IHT) reliefs in the form of Business Property Relief (BPR) and Agricultural Property Relief (APR), the individual should be actively trading at the date of death. In addition, in an ideal world, they should be in occupation of the farmhouse to be able to claim APR on the dwelling.
An LPA can help with such claims should the individual lose capacity, as they can legally represent the individual on such matters. For example, if a daughter were appointed as her father’s LPA, if she is in occupation of the farmhouse to assist with care, this could help with an APR claim on the farmhouse. Also, by ensuring that the daughter is involved in financial and business decisions for the farm, essentially as an extension of her father, it is deemed that he is effectively still farming up to his death, which will strengthen any claims for BPR and APR on the farming assets as a whole.
The LPA can also be a practical tool for lifetime gifting, with current concerns over the future availability of APR, making the most of current reliefs on lifetime gifts such as holdover relief and rollover relief may be beneficial to many families.
When someone loses capacity, the family often believes that no further lifetime gifts can be undertaken, but with an LPA families can continue to plan for the future and decide how is best to pass on the family assets, although this can be a sensitive area and it is recommended to make use of letters of wishes during this process and involve a solicitor where necessary.
With so many uncertainties, it is a good time to think ahead and sort out the housekeeping of an LPA.
Rosie Bennett ACCA
Rosie joined Evolution ABS in 2012 and has recently completed her ACCA qualification. Rosie is now continuing her studies by sitting her Chartered Tax Exams.
Rosie lives on her family dairy farm, where she enjoys helping out in her free time. She also is involved with Honiton Young Farmers and is very passionate about showing cattle.