More than 120,000 Canadian farmers will turn 65 within the next decade. $50 billion in farm assets will be forced to change hands. Yet, despite this impending retirement boom, and our own inevitable mortality, only two to four percent of farmers have a documented farm succession plan. This according to a study released by the George Morris Center and the Royal Bank.
Another situation common to farm families comprised of the parents and several children is that not all of the children may wish to remain on the farm (today more the rule than the exception) or desire to farm as part of an extended family. The dilemma facing these families is how to separate their assets upon retirement or death in a way that is equitable yet does not compromise the financial well-being of the continuance of the farming operation. This same question relates not only to farmers, but to any business owner. Careful consideration must be given to both the present and future structure of the farm. This can have a dramatic consequence as to how the farm assets are taxed when transferred to the next family member. Depending on the type of assets and who will acquiring them will determine whether the farm remains a sole proprietorship, a partnership or should be incorporated. The pros and cons must be examined to determine the best structure today and in the future.
Almost without exception, the transfer of the family farm is far more difficult than any other type of business for the following reasons:
- The family home is usually located on the farm. How many business owners would want to retire if it meant they had to move out of their home?
- Farming is capital intensive, which may tend to scare away succession owners.
- Most farm families tend to have the vast majority of their wealth tied up in the farm itself.
- Generally all of the children worked on the farm while growing up. This creates a strong emotional bond with the farm, but it may also imply an element of ownership or entitlement that may not fit a conventional succession plan.
- Farming can be a 24 hour a day occupation and there is often little distinction between business and personal interests.
Obviously, a great deal of thought and planning go into a successful succession plan. It is highly recommended that one deal with an integrated team of professionals that include an Accountant, Lawyer, Investment Advisor and Insurance Specialist. Greater Assets Inc will help you in not only the insurance and advisory roles but also in quarterbacking the team of professionals to ensure everyone is working together in an efficient and productive manner to ensure your future.