Farm transfers a growing trend

Demographics suggest as much as 70 percent of all farmland in North America will be transferred in the next decade.
In Canada alone, studies have found that 120,000 farmers will reach retirement age and $50 billion of farm capital will be transferred. However, about 90 percent of farms have no documented succession plan, or do not have one that is viable.
Discussions among family members about taking over the family farm can be quite emotionally charged. Advice to farm families it to talk to each other openly about this matter—and soon.
The best time to start talking about farm succession is when children are in their teens. That gives you plenty of time to work out an arrangement that will best suit all parties.
For those getting ready for a transfer of ownership, deciding what’s going to be fair to all parties involved is key.
The first step is making sure that the parents get enough income from the transfer to be able to live in retirement. Ideally, parents will have other assets such as RRSPs, but in many cases the farm is the main, or sole, asset.
In that case, it will not be possible to give the farm to a child, and ways will need to be found for the parents to derive a retirement income from the transfer.
In the majority of cases, where a child or children take over the farm, parents take on the financing on the child’s behalf. What that will do for the succeeding generation is greatly reduce the pressure of debt servicing.
Most parents charge somewhere between five percent and zero interest—if you don’t have to pay the interest on a $400,000 or $500,000 debt, it makes a significant difference.
Tax issues should not be the motivating factor in the choice of how to transfer the farm. Farmers are urged to familiarize themselves with methods of transfer available to them such as rollovers.
Transfers should be considered from a business perspective, with consideration given to what will enable the farm to continue to operate viably—you want to make sure that the farm will continue to cash flow.
Finally, be careful in selecting the professionals to seek advice from in farm succession planning. Make sure the lawyers and accountants you choose really understand farm transfers.
Dates to remember:
•Sept. 6—Rainy River Cattlemen’s Yearling Sale, Stratton Sale Yard

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