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Poor estate planning can ruin families

Financial tools can also minimize asset shrinkage

December 16, 2012
By LARRY KERSHNER, kersh@farm-news.com , Messenger News

So here's one farm succession scenario.

A farm son is 40 and looks to be the farm owner someday. He's worked the land actively with his father for 18 years and has been on the job basically since age 5.

He's rented dad's ground for the past several years but would like to buy it.

His four non-farming siblings are in line for a piece of the farm distribution when dad passes and he'll probably have to buy their shares.

But land prices keep spiralling upward and his siblings know it and often mention that fact.

What's he going to do?

Such scenarios is what Myron Friesen, of Osage, routinely deals with as a farm financial counsellor for Farm Financial Strategies Inc.

"Estate tax exemptions are considered a tax break for the wealthy. And we are all considered wealthy in this room."

This statement opened Friesen's presentation on Dec. 6 on estate tax planning, speaking to about 40 people during the Farm News Ag Show.

Friesen said most family members will agree that fewer taxes is a good thing, but much disagreement can result when it comes to dividing a farm's assets among descendants.

He said sound financial planning also includes strategies for minimizing asset shrinkage, aside from who gets what part of the farm.

Sound planning for future possibilities, such as death or disablement to prevent farmers from what they love to do, is prudent and necessary, because anything can happen at any time.

"Why would you ever want to stop farming?" Friesen asked his audience. "But what happens if you have to?

"Statistically, death is a 100 percent chance. You never know when the time will come."

He walked his audience through a series of estate strategies that start with understanding exactly how a farm is owned - sole ownership, joint ownership, tenants in common, through a trust, incorporated, limited partnership are some of the options.

Knowing ownership helps determine who will be on the hook to pay the estate tax and when. For instance, if the estate is passed onto a surviving spouse, the estate tax is not paid after the first death but after the second. But other arrangements may mean the tax is paid after the owner's death.

He listed a number of estate planning tools available to farmers. These include:

 
 

 

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