In succession planning, equal isn’t always fair
Farmers Forum staff
OTTAWA — In farm succession planning, treating children equally does not always mean fair, as farm assets differ from liquid cash due to ongoing business risks and the need for active management. That’s the observation of Regina lawyer Rick Van Beselaere in a recent Q&A published by Farm Credit Canada.
“In my view, a transfer of a million in farm assets can’t be viewed the same way as a million in cash. A child getting the farm assets has the ongoing business risk that is farming, and the farm assets are not liquid. In addition, the $1 million in cash will return value, but $1 million in farmland needs the hard work of the farming child to generate anything,” Beselaere explained.
“Whether the farm child or children have contributed more to the farm business than their siblings may also be a factor. Every family must come to its own conclusion about what is fair.”
Life insurance can help equalize distributions but may be costly or insufficient for high-value farms, he advised.
According to the lawyer:
Passing farmland to non-farming children is common, often with mechanisms like lease agreements, mortgages, or rights of first refusal to ensure the farming child retains access. Challenges include creating a formal, written agreement and conducting a thorough business analysis to assess the farm’s capacity and future viability.
For incorporated farms, establishing different share classes early allows flexible dividend payments to balance allocations.
A detailed succession plan is critical to preserve the farm for future generations.
