Brooks (Rural Roots Canada) – Ensuring the parents have security in the farm succession plan.
MLT Aikins LLP’s Eric Dalke says ensuring there’s a plan for Mom and Dad’s security, who have put their entire lives into the farm operation, is very important during the transitioning of the assets, because their net worth is often tied up in the farm.
“We need to talk about where are Mom and Dad going to live for the remainder of their lives?” Dalke said.
“Will they have successful income and again if something goes wrong in the transition plan what kind of security are they going to have at the end of the day.”
READ MORE: Communication early and often key to avoid estate fights: Dalke
Dalke says if he is doing a transition plan and is moving land and other assets, he will often hold a couple of things back for Mom and Dad.
“Sometimes I’ll do that for a promissory note, I’ll make sure in some instances to take back a mortgage or perhaps a security interest in those shares to make sure that if Mom and Dad (are protected) just in case the deal goes bad or if son or daughter decides it is not for them or the farm doesn’t do very well that Mom and Dad can actually enforce on that on that security just in case.”
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He says typically many of his clients just want to send things down the line without any security.
“I always advise make sure you put some security in place and you make it enforceable because really Mom and Dad built up this farm, primarily it is their asset to determine what they want to do with it so we want to make sure it is their security is assured, while also not hand-stringing that next generation.”
Successful Succession Strategies: Fairness for Children | Rural Roots CanadaOctober 6, 2020 - 11:50 am
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