DECEMBER 2018 • COUNTRY LIFE IN BC


Keeping the end in mind


Careful succession preplanning required as farms grow larger “Most first-generation


by DAVID SCHMIDT ABBOTSFORD – Canadian


agriculture is facing a crisis of succession, accountant and financial advisor Rick Gendemann, lead partner of business advisory firm Manning Elliott LLP, told the Fraser Valley chapter of the Canadian Association of Farm Advisors in Abbotsford, November 13. Gendemann presented statistics showing that not only are most Canadian farmers over 55 but about 75% of them don’t have anyone to pass the farm on to. Even those that do often don’t know how to go about it.


Gendemann stressed transition is a process and not an easy one. It involves hard work and can take months, if not years. When planning a transition, people should think with the end in mind. “That allows you to build a strategy to get you there,” he said.


The first question is to determine whether to transfer or sell the farm. The next question is how to make the transition or sale tax- efficient, which often requires careful preplanning. Finally, and most important, if the decision is to transition the farm, you have to determine how to fund the transition and how to deal with family members who don’t want to be active members of the farm. “The key is to have open and honest communication,” said Gendemann, something which is often easier said than done.


owners keep things close to their chest,” he noted, telling his audience “we have to do a better job as advisors.” Gendemann stressed that while first-generation farmers are generally hands-on operators, the scale of today’s farms and the technology involved requires a different skill set. That means farmers intending to pass on their farms must first assess whether the intended heir has the required skills. “Can they lead the farm


business, not just operate it?” he asked. If not, perhaps the first step is to get them the training they need.


The biggest issue arises when one or more children want to take over the farm but others don’t. Gendemann noted most


assets are in the farm rather than in RRSPs, cash or other liquid investments. “Farms may not be able to


cash-flow buying out other siblings. That may require some liquidation, which could destroy the farm’s viability,” he said.


One option might be to


create a family trust where one sibling manages the farm while the others are silent partners, reaping the rewards of an increase in the value of the estate. He noted family trusts can also defer capital gains taxes to a future generation or spread out the gain among more family members to maximize the lifetime capital gains exemption. To do that, farms must be a “qualified farm corporation,” which requires family members to be


AgSafe WISHES EVERYONE A MERRY CHRISTMAS & A SAFE NEW YEAR


Heppell’s Potato Corp. CEO Pete Schouten, left, and farm manager Jordan Voorhost show off some of the innovative products that won them the Agriculture Leadership award at the second annual Surrey Board of Trade agriculture awards, November 15. Heppell's Potato Corp. is one of the biggest potato and squash producers in the Fraser Valley, and exports its Hardbite chips internationally. RONDA PAYNE PHOTO


actively involved in the trust for a minimum of three years before the transition. He stressed successful transition


planning is a process rather than a one-time event. “Start the process sooner rather than later and keep


revisiting the plan as you go,” Gendemann advises, saying most people start “way too late.”


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