The Rural Voice, 1992-02, Page 18TREVOR HUNTER
Chartered Accountant
Providing a full range of financial
services to farmers and businessmen
in the areas of income tax
preparation, planning,
and accounting.
151 Garafraxa St., S.
Durham, Ontario
1-519-369-5663
HURON BRUCEFIELD
ONTARIO
NOM 1J0
AgVise.
Mervyn J. Erb
Agronomist
Private Practitioner In Agriculture
TELEPHONE: (519) 233-7100
MOBILE: (519) 272-7288
FAX: (519) 233-3444
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R. R. 6, SHELBURNE, Ont. LON 1S9
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Fax 925-6224
14 THE RURAL VOICE
RETIRING WITHOUT SELLING
So often we work for years in the
hope that we will be well provided
for in our retirement and still have the
pleasure of leaving a legacy to those
who follow. For the farm family, the
farm is usually the single most
valuable asset. How can the farm be
used to fund retirement and still
remain in the family to provide for
generations to come?
These goals may seem incom-
patible. For example, the simplest
method of arranging retirement often
is to liquidate. At present, the funds
generated receive special capital
gains treatment and are available for
liquid investment throughout our
retirement. Funds remaining at our
death may be distributed to our
children as we have seen fit, without
argument. However, unless a child
is financially able to purchase the
farm, liquidation of the farm to
finance retirement often requires
transfer of ownership of the farm to
strangers.
One method of funding retirement
while preserving the family farm
involves an estate freeze through
incorporation of the family farm and
a purchase over time by one or more
children of the parents' shares. The
difficulty often arises when deciding
to whom to transfer the interest.
Which child is the most reliable?
Which child is the most capable?
Which child understands the business
of farming? Particularly if a child is
considered immature or irresponsible,
a shareholders' agreement providing
the parents with voting control will
ensure that the family's equity in the
farm is not squandered.
Another concern which often
arises upon the transfer to a child of
the family farm is the potential claim
against the child's interest by the
child's spouse in the event of
marriage breakdown. If the farm is
transferred outright, the child will
become the absolute owner and, upon
separation, control of the farm may be
lost.
This loss of control can be
prevented through use of some form
of trust agreement. For example, a
trust might provide for the child to
meet certain conditions before the
farm becomes their absolute property.
If the conditions are not met, the trust
might provide for the sale of the farm.
The proceeds of sale may be invested
and the income and capital may be
paid out to the parents through their
retirement years.
Alternatively, as a condition of
transfer, the parents may insist on a
marriage contract being executed by
the child and his spouse, with the
parents joining in as third parties to
ensure their interests are protected.
This contract would specify that
payment to the parents would retain
priority. Such an agreement should
be coupled with adequate security
agreements or mortgages.0
Agrilaw is a syndicated column
produced by Cohen Highley Vogel &
Dawson, a full service London law
firm. Hamoody Hassan, an associate
in the firm, practises in the area of
family law. 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 contained
in Agrilaw, readers should obtain
legal advice with respect to their own
particular circumstances. 0