Last updated: Apr. 18, 2023
According to Statistics Canada, the value of equity in Canada’s farm sector totaled $627.6 billion at the end of 2021.
In the same year, the value of total assets rose by 9.5% to $749.8 billion
The only growing age group in the farm population was operators aged 55 and over. The average age of a farm operator is up to 56 years-old.
One can only assume that they probably own the greater share of farm assets and are likely ready to transfer them within the next 10 years.
This means that potentially hundreds of billions in assets are about to change hands in the coming years.
The problem, and hence the looming crisis, is that only 4.9 percent of sole proprietorship farmers (about half of all farms) in that age group have asset succession plans — including wills — while family and non-family farm corporations fare somewhat better at 16.3 percent, but are still dismally low.
Having an estate plan that includes a Will is critical to having your assets distributed as you wished through the hands of your chosen executor after your death.
Without a Will, the courts may appoint someone to liquidate or distribute your assets in a manner you might never have intended.
Not sure how to get the process started? Check out our free Guide to Transition Planning for Farmers.
The executer identified in your Will also have increased ability to follow your wishes while taking advantage of various strategies to minimize taxes and maximize proceeds for distribution.
For instance, leaving your farm assets to your spouse at your adjusted cost base has virtually no tax implications, and capital gains taxes are deferred until the eventual sale of the property or death of your spouse.
Alternatively, any capital gains exemption you may have available may be used to offset applicable capital gains on qualified farm property if the assets are transferred at fair market value.
This strategy allows you to take advantage of two capital gains exemptions and resets the adjusted cost base to the current fair market value.
Click for more tax management strategies for farmers.
There is a more complicated manner of transferring your property to your spouse through a testamentary spousal trust that delivers its own set of benefits, but the process should be incorporated in your Will only with the assistance of expert legal and financial advice.
A Will allows you to designate other beneficiaries, including children or other individuals, although the latter choice may result in the deemed disposal of qualified farm property and trigger capital gains on your final tax return.
If several children are involved, it may be wise to bequeath farm property to children with knowledge of and interest in farming while providing non-farm assets to the other children.
Assets transferred through a will are likely to be subject to a modest tax called probate.
These vary in amount by province but your legal and tax adviser will be able to identify the applicable probate tax involved.
Originally published on The Western Producer. Updated with 2022 statistics and figures.
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