Brooks (Rural Roots Canada) Fair is not equal in farm succession.
MLT Aikins Lawyer Eric Dalke says it is critical that everyone understands that fairness means the plan is communicated, there is awareness and it is accepted by all parties.
“So often I will start planning with the farming son or daughter and their parents, but I always encourage my clients to make sure this plan gets communicated out to the entire family in some fashion,” Dalke said.
“Ideally let’s try and get everybody in the family on board even if they are involved or not on the farm.”
He says this will allow the family to avoid disputes.
“I’ve been involved in some estate litigation on the solicitor side, in so many cases it often involves a delayed transition.”
Dalke says in lots of these cases the parents are elderly.
“So you’ve got Mom or Dad that’s 85 or north of 85. They’ve been around for a long time and the plan was never formulated it was never communicated, and the transition has ultimately been delayed.
READ MORE: Successful Succession Strategies: Protecting Mom and Dad
He says this creates a scenario where Mom or Dad (at that age) still own a majority of the farming assets which causes a back-up for the next generation.
“We already got a farming son or daughter who is 55, with children of their own who are looking to do planning of their own because the planning hasn’t taken place because the assets haven’t transferred from the older generation.”
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Dalke says this is why it is imperative to do a plan and communicate early.
Fairness for children can be difficult to achieve because farm assets are usually worth more than non-farm assets.
“Fair is not equal, because often if you have a farm worth, 3-million, 5-million, 10-million or north of 10.”
Dalke says there’s no way that the assets that the farming child are going to have transitioned to them get anywhere close to the non-farming child’s assets.
“In some cases they do, if there are significant non-farm assets, but usually, because farm assets are worth a lot more than non-farm assets and there are not a lot of non-farm assets kicking around on the farm or in the portfolio the parents.”
Dalke says this is why the discussion really needs to be taking place amongst the family and this whole idea about awareness and acceptance over that differential.
“That difference between the value of the farming assets and the non-farming assets need to be discussed on a go-forward basis.”
This is why he says awareness and acceptance are so important among the children.
Start Thinking About It: Farm Succession Planning Starts Now | Rural Roots CanadaAugust 26, 2022 - 12:25 pm
[…] RELATED:Successful Succession Strategies: Fairness for Children […]