BRANDON – Farmers create big tax risks for their families by not dealing with their inevitable deaths, says a farm financial expert.
“What happens if you die tomorrow? What happens if I die today,” are two of the questions farmers need to ponder, Shawn Friesen of BDO Dunwoody said during a presentation at Manitoba Ag Days.
“What does happen when I die? What are the tax implications for me? What are my kids going to be left with as tax liabilities? How is my estate going to be split up? Where is it going to go? Have I maximized the value of my estate? Have I done everything I can so that my heirs have the most when I leave?”
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Farms are organized in many ways and the tax implications of every farm are different. Different tax breaks and exemptions apply to different structures of a farm, something that farmers need to understand. Not every farmer qualifies for the same exemptions and treatment, so farmers shouldn’t rely on their neighbours’ experiences.
In an interview, Friesen said two situations in particular have major tax dangers:
1. The farm is incorporated but the farmer has been winding down the business by selling equipment and renting out his land.
That has left the corporation with large amounts of cash, which could trigger a tax bill of hundreds of thousands of dollars if the farmer suddenly dies and he has not found ways to shelter the money for his heirs.
“We want our farm businesses to do well, but we want to be able to take advantage of the exemptions for farmers,” Friesen said.
2. The farmer dies unexpectedly, leaving a messy situation and potential tax liabilities that could have been avoided.
“He never thought about planning because you always think you’re invincible, until something happens,” Friesen said.
Even farmers who have prepared their businesses for an unexpected death can leave them unprepared if they don’t keep updating their wills and accounting, Friesen said.
An out-of-date will that does not reflect the reality of the farm at the time of death can cause major problems for families.
