Perhaps it is procrastination or the simple avoidance of un-pleasant matters, but most Canadians do not have wills, and farmers follow the trend.
That is unfortunate because one of the largest asset transfers in Canadian history is about to happen involving the accumulated assets and capital tied up in farm operations in this country.
According to the latest Statistics Canada census, there were 293,925 farm operators in Canada in 2011. Classified by age, 48.3 percent of them were older than 55, which is up from 40.7 percent in 2005.
So, the aging of Canada’s farm population is advancing rapidly and by the next census much more than half of Canada’s farm owners will be older than 55.
Total capital tied up in land and buildings came in at more than $200 billion in 2011, and this does not include capital related to farm machinery and equipment, livestock and poultry and savings and other investments.
It’s conceivable, then, that more than $100 billion of those capital assets are in the hands of our 55-plus farm population.
How does one provide for the orderly transfer of those assets to the next generation without a will, particularly when fewer young people are staying on to work the farm?
A proper estate plan includes a will and outlines how you would like to distribute your assets and other financial affairs to your heirs.
Set up correctly, your estate plan will ensure your estate is settled as quickly as possible and in the most cost-efficient manner to avoid or minimize the costs and delays of probate.
Estate planning also takes into consideration any mental or physical incapacity that leaves you unable to manage your own financial and health affairs.
A designated power of attorney can help ensure your wishes are carried out.
Granted, many difficult questions and decisions are involved in preparing a will, but those problems are small compared to what happens if you die without a will.
Instead of you deciding how your estate is shared, the government takes control of the estate and will make all the decisions on how your assets are distributed.
The government’s logic and process of distributing your assets may be significantly different than the approach you would have taken.
Depending on the type of assets in your estate, there may be a “deemed disposition tax” that could seriously disrupt the financial lives of your surviving family.
Invariably, the cost of letting the government decide how to settle your estate will be far greater than seeking legal and financial advice on how best to set up a will and estate plan that will meet your family’s needs.
Beginning the process as early as possible increases your flexibility to structure your affairs in the most advantageous manner.
Life insurance could provide needed funds to cover any capital gains owing on the sale of the farm at death and could also provide funds for equitable distribution of the estate should one of your heirs de-cide to carry on the family farm.
Grant Diamond is a tax analyst in Kelowna, B.C. with FBC, a company that specializes in farm tax. Contact: [email protected] or 800-265-1002.