Legal aspects of Farm Transition Appreciation Day, Jan. 11
Monday, January 10, 2022 @ 12:52 PM | By Kelli Potter
Lawyers are key advisers in any farm transition. Transition plans generally require advice and expertise in areas like real estate conveyancing, corporate and commercial transactions, taxation, family law, estate planning and even alternative dispute resolution.
It is estimated that approximately 300,000 Canadians earn their living through farming, with hundreds of thousands more earning their livelihoods from offshoots of agribusiness. Additionally, farming has become far more complex over the past few decades, with some of the largest intergenerational wealth transfers in Canada being connected to the conveyance of farm assets.
According to the agricultural census, only around eight per cent of farmers have a formal succession plan in place despite that over the next 10 years 75 per cent of farms in Canada are expected to change ownership. Far too often, transition plans are not executed until death, health issues or shareholder disputes force the issue. So, what does this mean for lawyers?
Probably the first thing that lawyers need to remember is that farmers almost always have a significant emotional connection to their farm. Generally speaking, your client will be very invested in preserving their legacy, because it is also their parents’ and grandparents’ legacy. Farmers often see themselves as the custodian of a farming operation as opposed to a business owner. That in itself can present challenges when communicating with and advising a client. One of the most surprising things that you may find as a legal adviser to farmers is that their priorities in a transition are just as often driven by emotional factors as financial ones — sometimes more so.
It is also not just the feelings and views of the farmer that need to be heard. Advisers often end up hearing the voices of a very loud Greek chorus. Farming and non-farming family members and stakeholders are almost always part of the transition discussions and these conversations usually include the question of whether to transfer farm and/or personal assets to non-farming stakeholders (a.k.a.: Off-farm children or grandchildren). From the outside, this looks a lot like estate planning and it is, but with a significant undercurrent of concepts such as “fairness” and “responsibility.”
As with most things in life, timing is everything when it comes to formulating and executing a farm transition plan. There is a lot to consider when one generation hands the baton to the next. Often, the steps in a transition plan need to be implemented over a lengthy period of time in order to accommodate matters such as taxation issues and cash flow (among many others). This means that good client education is imperative. Having a written plan and setting timelines is necessary to allow clients to properly plan both financially and emotionally for each step in the transition.
While the conveyance of real property, drafting of commercial documents and contracts and updating your clients’ wills and powers of attorney might be some of the more obvious components of a transition plan, family law issues are often less obvious and can be inadvertently overlooked. If the retiring farmer is separated or divorced there may be issues to consider related to the payment of support, the equalization of family property, gifted or inherited assets that may be exempt from shareability and other factors. And what of the farmer acquiring the assets? Does he/she have a spouse and is there a need for a spousal agreement? Is there a plan for how the farm will be dealt with in the event of a marriage breakdown?
The multifaceted and complex nature of farm transitions is one of the reasons that Farm Transition Appreciation Day was created. If you are interested in learning more, I would invite you to virtually attend the free Farm Transition Appreciation Day learning events on Jan. 11, 2022:
Join Canadian Association of Farm Advisors (CAFA) to discuss all things farm transition — bring your questions and ask the experts. Featuring Wendall Kerr (ITI Financial Inc.), Lorna McKercher (RBC Royal Bank), myself, and Kagan Sirett (MNP LLP). 10 a.m. – 11:30 a.m. EST Farm Advisor Panel.
Join Maggie Van Camp (BDO) and Patti Durand (FCC) as they interview producers Lesley Kelly and Colin Penner and share their own stories on turning roadblocks into building blocks. 2 p.m. – 3:30 p.m. EST Turning Roadblocks into Building Blocks.
Raised on a farm south of Dauphin, Man., Kelli Potter started her legal career in Winnipeg before moving to western Manitoba in 2010. She has a broad range of experience in assisting clients with agribusiness matters including farm transition and succession planning as well as providing legal support to farming families in family law matters. Kelli has over 20 years of experience in mediation and alternate dispute resolution and is an accredited mediator and arbitrator. She is a partner at Patersons LLP.
Photo credit / Likoper ISTOCKPHOTO.COM
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