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The Rural Voice, 1990-06, Page 18GICRATES FOR 45 TRUST COMPANIES A " An Investments Guaranteed It Insured ° No Fees or Charges Funds Transferred VIA Chartered Bank ECINVESTMENTS GOUGNIm;II 1-800-265-5503 Mi -T -MT"' COLD WATER PRESSURE WASHER For farms, small ' businesses, homes and general industrial maintenance • Oil bath crankcase pump Specifications: • Ceramic plungers Pressure PSI/BAR -1000/69 • Adjustable chemical Motor -1.5 HP•TEFC • 25' reinforced steel braided Current 14.5 amps pressure hose DISTRIBUTOR *Canada Farm Distributors Ltd. Tavistock, Ontario NOB 2110 (519) 655-2584 IS YOUR WELL PUMPING IRON? MacCLEAN IRON FILTERS • Iron Free — Iron Clad Guarantee • Chemical Free Operation • No Operating Costs • Maintenance Free Water Conditioning Canada Ltd. CALL US FOR A NO COST WATER TEST! 519-371-0605 1042 2nd Ave. E. OWEN SOUND raCOOK'S WATER 1111•1111111,SYSTEMS 14 THE RURAL VOICE THE FUTURE OF THE FARM - PLAN AHEAD To preserve a farm for succeeding generations and to prevent the unnec- essary erosion of farm values through taxation requires planning. Using the provisions of the In- come Tax Act, along with creativity in drafting a will and in developing an estate plan, will help ensure the con- tinuation of the family farm in accor- dance with the wishes stated in a will. Estate planning will depend on a testator's circumstances. If the farm is to go to a spouse or child alone, no special provisions may be needed. This simple scenario, however, is often not the case. If a testator wants to provide for a spouse and several infant children, and the farm is the bulk of the estate, it may be best to establish a spousal trust to hold the farm property, with a fur- ther rollover to the children upon the spouse's death, if still available. If the testator expects the children will continue the farm business, but the surviving spouse will be unable to operate the farm, he might provide for the employment of a manager. Or the property could be leased out, with the income generated going to the trust. If a testator wants to provide for a spouse and several adult children, it might be best to provide for the spouse through life insurance and a Life in- terest in the matrimonial home. Alternatively, the home might be severed prior to the testator's death and transferred to the spouse outright under the will. The farm property could then be transferred to the chil- dren jointly if all the children wish to continue farming. If only one of the children wants to farm, the farm could be rolled over to that child and life insurance could be used to fund bequests of equal value to the other children. Another alternative would be to give the child who wants to farm the option of buying out the interests of the other children, possibly by grant- ing them mortgages. The solution may be easier if the farm is incorporated. The rollover provisions of the Income Tax Act con- tinue to apply (to avoid the taxation of capital gains) and the share structure can be arranged during a testator's lifetime for a clean, easy disposition. Alternatively, the children who do not want to farm could be granted shares which permit fixed or limited participation in income distribution. Profit participating shares would be granted to the children who do farm. One option frequently used for an incorporated farm is known as an "es- tate freeze." This attempts to minim- ize capital gains tax after a death by ensuring that the value of the taxpay- er's estate will not increase after the freeze is implemented. A common method of "freezing" is that a taxpayer "freezes" his interest in the value of a corporation by exchang- ing the profit -participating shares (common shares) of a family farm cor- poration for fixed income shares (pre- ferred shares). The common shares are then purchased by the children.0 Agrilaw is produced by Cohen, Melnitzer, a full-service London law firm. Marlene McGrath practises in the areas of corporate and commercial law, wills, and estate planning. Agrilaw is intended to provide information to farmers on subjects of interest and importance. The opinions expressed are not intended as legal advice. Before acting on any information in Agrilaw, readers should obtain legal advice with respect to their own circumstances.