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Planning for your future care needs

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What happens to the assets of an elderly farmer who needs to go into care?

Farming families are treated particularly harshly when it comes to payment of care fees.

It is common for an elderly farmer to farm in partnership with his child or children, so that he has a share in a valuable business. Many an elderly farmer does not want to give up control of the farm which he may have spent a lifetime improving. The availability of Income Tax reliefs, and Inheritance Tax relief on the farmhouse, means that it can be bad idea to gift assets during one’s lifetime and to stop being a farmer. It is said that ‘farmers never retire, they just die.’

Where does this leave the elderly farmer if he or she needs to go into care? The basic rule is that if you have assets of more than £23,250, you are expected to pay for your own care fees, and government will assist if your wealth drops below that. Yet a farmer with a 220 acre farm – the average size of farm in Yorkshire and the Humber – would be deemed to have assets in the region of £2,000,000. If the farmer has insufficient income to pay his care fees he would be expected to sell assets: land. With care fees reaching £60,000 a year or more, it is unlikely that a typical farm would be able to support that level of expenditure out of business profits, let alone provide for other members of the family (the average net profit of a North Yorkshire farm is £26,000.)

The fact that a farm has been in a family for generations, or that it yields a comparatively low income, is not taken into account. It is inevitably the next generation which bears the burden, hemmed in by lack of cash and forced to reduce personal expenditure in order to keep the farm business intact.

There is little relief available for the farm being a business. The local authority will disregard business assets if efforts are being made to sell them, but it is unlikely that a farming family will want to sell land unless absolutely necessary.

The natural response of many when considering the prospect of care fees is to give away assets. There are comprehensive and effective rules preventing such ‘deliberate deprivation’ and local authorities can (and do) recover gifts or treat them as void. Golden promises made by ‘wealth preservation’ businesses offering ‘asset protection trusts’ are inevitably empty and can have disastrous consequences.

It is always worth considering whether NHS funding is available. When the primary reason for a person entering a care home is healthcare needs rather than old age, then the NHS should pay for the care fees.

The farmer should also claim all available benefits such as Attendance Allowance – unlike state pension, this must be claimed.

When they are looking at succession planning, farmers should consider care fees alongside finances, tax and business succession. However, the potential care fees liability is unlikely to approach the amount of Inheritance Tax saved under farming reliefs and to that end, farmers should prioritise protecting their tax position with professional advice.

If yuo need assistance with this or any of the issues raised, our Agricultural Team based at our Malton office will be able to help with both the Will and the commercial planning aspects. For more information, telephone 01653 600070.