The Rural Voice, 2003-10, Page 7Your Farm Legacy - Debt or Equity?
Your Farm: for years you and your spouse have worked hard to make your
farm operation the success it is today. Perhaps you are the next generation and
want to farm or own the land base. It is also likely that you are the third or
fourth generation to work the farm as it passedfrom generation to generation.
In the years to come you may want to repeat this process. However, times have
changed!
- profitability & debt load are different from a generation ago.
- people are living longer...so children sometimes have to wait longer
and/or care for their aging parents.
- the family structure has changed - today farms cannot be passed on to
siblings and their families and expect harmony. It is not usually viable
to divide a farm operation into smaller pieces.
The Problems: - Who inherits the farm? Equitable distributions! Maintaining a viable operation.
How does this happen without borrowing money to purchase the same farm?
Time - succession planning or estate distribution often takes a backseat to everything else when it should be
just as important as a business plan.
Distribution - the final phase of estate planning. What taxes will be owing?
Before you and your spouse make concrete plans there are a number of questions you must answer:
- if you die today, what exactly do you wish to happen to your assets?
- if you pass the farm to your children, will your surviving spouse have sufficient assets to maintain
his/her lifestyle?
- do you wish to treat your farming children and non -farming children equally or equitably?
- is there sufficient cash to pay for costs associated with death - funeral, legal fees, probate fees, executor
fees, debts, capital gains and all other taxes such as those owing on registered money?
Common thread in the planning process:
Although each farm operation is different, common threads run through many farmers' thought -planning
process;
1. The surviving spouse must be financially secure.
2. The child who wishes to farm must be assured he/she will ultimately receive the farm.
3. All non -farming children should be treated fairly.
Critical areas:
1. Retirement, security of parents.
2. Parents giving up control.
3. Security & income for the younger generation.
4. Freedom to make some decisions for the younger generation.
5. Fairness.
6. Tax laws.
7. Keeping the farm intact.
8. Maintaining family goodwill.
In succession planning the first step, as with any other plan is to determine the objectives. What do you
as the farmer/owner want? What do your farming children want? What do your non -farming children want?
The simple answer is that succession plans are often compromises between generations. If a compromise
cannot be reached, then there is no plan and the consequences could be devastating to the family.
So - how do you start down the road to plan for estate distribution? Quite
simply, you must start the process and explore options. Exploring the options
should result in sound viable alternatives.
Start the planning process today! Tomorrow may have less options. think
about the financial and emotional security of survivors. Ensure a viable
operation is passed on to the next generation. Consider all your children and
what is fair.
The answers are within your reach...
The first step is to begin...
For creative and
innovative ideas
call Nancy Ackert
Life Insurance Advisor
1-866-396-8108 today.
BERKSHIRE
INSUlt•NCK R[RVICt• INC
OCTOBER 2003 3