I have said it before and I will say it again: every farm will be transitioned at some point in time. It will either be done voluntarily in your lifetime to a family member or third party, or involuntarily through your estate. When we meet with farm families and ask them about their estate plan, we always ask, “When was the last time you updated your Will or Wills. It is not uncommon that we hear back “Oh, the Will – the document that we completed and put in our safety deposit box over 15 year ago.”
Just like land and quota prices, family dynamics, estate laws and the income tax act continue to change and evolve over time. This means that your estate plan needs to address these changes and we recommend you review it every three years or sooner if there is a major change in your planning. An example of a major change would be the addition or loss of a family member, a new farm purchase or a change in who you would like to leave your assets to. This is just a few items, but there are many reasons to revisit your estate plan, and specifically your Will or Wills.
What is a Will?
A Will is a legal document that can help ensure your assets pass according to your wishes after your death. Your Will only becomes effective upon your death. Until then, you can change the terms or revoke your Will as long as you are mentally competent. When you are completing a Will or review your existing Will, there are two key areas you want to make sure you are still okay with: Who does the work? And who gets the benefit?
Who does the work?
Your Will should name an executor (or executors), the individual or institution that will act on your behalf to carry out your wishes. Without a Will, the court may appoint an administrator for your estate, who may not be the individual or institution you would have chosen. An estate plan that incorporates a Will can allow you to communicate instructions and strategies to your executor so that your wishes are realized. This may include, for example, providing sufficient income for your spouse and children to maintain their lifestyle. Your legal professionals can draft your Will or Wills in a way that allows your executor to implement tax-saving strategies for the transfer of your farming assets.
When choosing an executor or reviewing your existing executor, it is important to consider whether who you have chosen is capable of handling the task. Does this individual understand farming? Or more specifically, your farming operation? We also want to consider where they live and where your assets are. For example, does it make sense to name all three of your children as executors when your farms are in Ontario and one of your children lives in British Columbia? Will the child in British Columbia be able to make the appointments and sign the paperwork required to carry out the duties of executor? Lastly, we want to consider your relationship with the individual or individuals you have named as executor of your Will or Wills. Sometimes, relationships change or sour over the years. If person you have named as the executor in your Will is no longer as close to you, you need to reflect that change in your Will.
Who gets the benefit?
Who gets the family farm? Do you leave it to all your children as joint owners? Do you have assets outside of the farm for non-farming children? These have been some of the toughest questions for farm families and often require well-thought-out planning. Part of what makes it difficult is the appreciation of farming assets from a net-worth point, but not all farming assets generate a high or the same level of cash flow. We have all heard the saying, “What is fair is not always equal.” On top of that there are also different tax implications and opportunities depending on whom you name as the beneficiary of your assets. This may seem like a daunting task, but the good news is there are many professionals out there that can help you make well-informed decisions. The worst decision you can make is to do nothing at all and let the beneficiaries deal with it or – in the worst-case scenario – fight it out.
When we discuss estate planning and distribution with our clients, we always have a goal. The goal is to have all the family members get together for Thanksgiving and Christmas, even if mom and dad are no longer here. The farm family that has a well-thought-out, communicated estate plan has much better odds of achieving this goal than the farm family that chooses to not review or update these important parts of their Will.