Succession Survey Report Q&A

Rural Solutions work with estates across the country developing long-term strategies, so it was with great interest that we read the findings of a research project by Saffery and Historic Houses focusing on all things relating to succession, a common theme in our conversations.

The project, the Saffery and Historic Houses: succession survey report, gathered input from over 140 respondents (representing the ownership of over 250,000 acres across the UK), and included Saffery’s clients, contacts, Historic Houses members and peers who either currently own estates or are expected to inherit them in the future and highlighted the intricacies and challenges of succession planning for estates.

Nicky Witchell, Senior Consultant and Estates Lead at Rural Solutions spoke to David Chismon, Partner and Head of Saffery’s Land and Rural Practice Group to get his thoughts on the project.

What most interested/surprised you in the findings of the 2024 Saffery and Historic House succession survey report?

I was particularly struck by the fact that 42% of survey participants, who collectively represent estates valued at over £300 million, admitted that they don’t currently have a plan or process in place for preparing the next generation to take over the family estate. This could be due to several reasons, but perhaps it first and foremost confirms that the complexities and difficulties involved in succession planning for historic estates remain unchanged.

This gap poses a significant threat to the ongoing stewardship and sustainability of some of the UK's most significant estates and natural resources. It’s important to note that each estate owner faces unique circumstances, and there can be legitimate reasons for not yet having a formal plan in place.

There is a mismatch in the amount of time that current owners would like as a handover period and the amount of time that inheritors would like. Is this disconnect one of the reasons that more than 40% of owners currently have no succession plan or process in place?

Generational differences are always going to be one of the key challenges for succession planning, and this disparity in handover periods is a prime example of the variances in opinion that occur between generations. The figures are quite stark, however we must take into consideration that current estate owners are fully aware (through their years of experience) of the many aspects that will need time to learn and pass on. Inheritors are likely to be raring to go and hoping to speed things along. However, I would expect that when succession planning is taking place, a compromise is likely to be met.

It could be one of the main contributing factors as to why so many estates haven’t got a plan or process in place yet, but there are going to be a lot of other reasons, and I don’t think you could pin it down to this specific circumstance.

Diversification into climate and nature related revenue streams are foremost in the minds of owners and their successors. What are the key things that estates should consider relating to succession before becoming active/more active in these areas?

From our findings, it's evident that estate owners are increasingly interested in approaches that reflect the rising concern for climate change and environmental conservation. With the UK government's goals for net zero emissions and the 30by30 initiative for nature recovery, there are both regulatory incentives and economic prospects to consider. These include carbon credits, with natural assets like forests and peatlands serving as crucial carbon sinks, and the new Biodiversity Net Gain scheme, both of which offer promising revenue opportunities.

As highlighted in our interview with Dr The Hon. Philip Sidney, who is set to inherit Penshurst Place in Kent, “it’s important to recognise that as the world moves on, the estate has to as well.” It’s positive that people are striving to be more environmentally conscious, but it’s important to consider whether a certain initiative is right for a particular estate. As with a succession plan, diversification strategies will be unique for each estate.

Almost a third of respondents said that if none of their heirs wished to inherit, they would prefer to dispose of the estate. Do you think that this will result in an increase in the number of estates coming onto the market?

This is a difficult question to give any concrete views on, but given the responses, we must acknowledge it’s a possibility.

I suspect part of this response is the wider issue and recognition of the responsibility that comes alongside owning and managing an estate. It seems to me that if there is an open dialogue about what succession will entail and sharing knowledge etc., that any reticence from those inheriting might be diminished substantially, so that a sale is not then the ultimate outcome. As advisers, we know that it’s part of our responsibility to help guide owners and those succeeding through this process.

Over 30% of respondents purchased their estates privately or through a business meaning they are not successors themselves. Will this impact how they approach succession?

As mentioned, a succession plan will look different for every estate and family. However, there could potentially be some key differences including:

- Diversifying for business/focusing on entrepreneurial approaches vs emotional attachments and family legacies.

- Buyers implementing modern approaches vs successors that are influenced by familial expectations.

- Flexibility and pragmatic approaches vs choices shaped by tradition/long-term stewardship and history.

In any case, I would have to refer back to our top 10 tips for succession planning as these would be relevant to anyone in this situation.

You found that almost a third of respondents were unaware of Conditional Exemption from Inheritance Tax (IHT). Can you explain what this is and when/why estates should consider it?

Conditional Exemption allows owners of works of art or heritage properties to defer IHT either upon death or as a lifetime gift. Under this scheme, assets such as buildings, land, and objects with national scientific, historic, or artistic interest can be exempted from IHT (and capital gains tax), provided certain conditions are met.

By considering this scheme, estate owners can strategically manage tax liabilities while preserving significant assets, ensuring any ongoing public benefit, and family heritage. Whilst it can save families substantial IHT, the regime does require that the new owners of the heritage assets provide undertakings to HMRC to ensure the assets are preserved and there will also be an element of public access as well. The IHT is deferred until there is a sale of the asset or a significant breach of the undertakings. So, it’s a regime which needs to be entered into with careful advice.

As over 30% of current estate owners that we surveyed were unaware of this scheme, it suggests that they could be missing out on a valuable tax relief. This could be due to a lack of understanding or appreciation of its potential application, and therefore needs careful consideration before utilising.

Although, surprisingly, we found that IHT mitigation doesn’t factor as a primary succession plan consideration for many of the estates we spoke to, but this relief is still an important part of tax planning for many estates.

What impact might any change of government have on the findings of the next succession report/research?

We can’t predict the future however we can look back on our previous reports to see what has changed. Although there has been a shift in societal views since our landmark survey in 2005 and supplementary research in 2011, succession issues remain as complex as ever.

This is a direct quote from a respondent in our 2005 survey; the context is still relevant today, and arguably will be well into the future:

“Succession is not just about money, or even wealth, it is about passing on the baton from one generation to the next and, where substantial assets are concerned, it is not only the ownership which changes hands, but the management of those assets, which may be important to the wider community as well as to those directly involved.”

However, if there was a change in tax policy, it could impact important assets such as estates and the move towards being more environmentally focused as a country will also likely affect the future of these assets.

To read more follow this link to the full survey findings - Succession survey report - Succession survey report - 2024 (foleon.com)

More on Nicky and David:

Nicky Witchell, Senior Consultant and Estates Lead at Rural Solutions

An experienced Consultant with over 20 years operating in Culture, Sport and Heritage, Nicky has worked closely with estates both in-house and as a consultant, to establish and implement strategies and development plans.

Her additional experience in project management, stakeholder engagement and marketing and communications offers clients a diverse knowledge base.

She currently works with a range of landowners on a variety of projects where she utilises her experience of how estates operate to promote the pivotal role that they play delivering environmental, cultural, social and economic benefits, to help secure viable and sustainable futures for these special places.

David Chismon, Partner and Head of Saffery’s Land and Rural Practice Group

David’s principal area of work is advising owners of landed and rural estates, which includes individuals, companies, partnerships and trusts, including Heritage Maintenance Funds.

He also provides advice to owner-managed businesses and high-net-worth individuals, and enjoys working closely with clients, their families and other professional advisers.

David has a keen interest in ensuring that wealth is not eroded by capital taxation and is well versed in providing clear and practical advice that is tailored to meet both the business and personal objectives of his clients.