In this presentation, FMC’s Doris Bonora and Mark Woltersdorf outline the important considerations when planning before death, including: - Power of Attorney - Personal Directive - Farm Tax Planning - Estate Freeze - Wills

1. Giving Away the Farm
Presented by: Doris Bonora and Mark Woltersdorf
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2. Planning before Death
•Power of Attorney
•Personal Directive
•Farm Tax Planning
•Estate Freeze
•Will
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3. Enduring Power of Attorney
•Deal with financial affairs
•Immediate or springing
•Important to choose farm manager to be attorney:
must be someone who can manage the farm or
someone who will find someone to manage the
farm
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4. Enduring Power of Attorney
•No assumption that spouse or child will have
power
•Gives access to information
•Be specific
•If there are agreements in place to sell the farm or
give it to a child, this should be reflected in the
Power of Attorney. Direct the attorney to review
the will for any instructions.
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5. Enduring Power of Attorney
•Name an alternate
•Have a dispute resolution mechanism such as an
arbitration clause
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6. Personal Directive
•Deals with all non‐financial matters
– Health care
– Living accommodations
– Social activities
– Employment activities
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7. Personal Directive
•Appoint an Agent – health care advocate
– spouse
– children
– trusted friend
•Donation of organs
•Medical intervention if in vegetative state
•Stay at home as long as possible
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8. If no EPA or PD was Prepared
•Adult Guardianship and Trusteeship Act
– Appointment of trustee and guardian
•increased costs for legal and medical report ($500‐$700
for medical report and $750‐$1500 for legal fees)
•trustee to file accounts with the Court
•all family notified… public guardian to interview person
•report of decisions filed
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9. Farm Tax Planning
Structuring the farm
– proprietorship
– partnership
– co‐ownership arrangements
– trusts
– joint venture
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10. Farm Tax Planning
•Key objective – minimizing tax during lifetime and
at death
– personal vs. corporate tax rates (39% vs. 14%)
– tax integration, capital gains, GRIP
– lifetime capital gain deduction
– spousal and dependent rollovers
– reserves
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11. Farm Tax Planning
•Personal vs. Corporate tax rates (39% vs. 14%)
– utilizing basic credits to extent possible (basic, spousal,
disability, etc.)
– RRSP desirability (salary vs. dividend)
– trapping losses
– income splitting using dividends vs. salary
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12. Farm Tax Planning
•Tax Integration
– consider impact of integration:
•personal 39%
•small business dividend 37.8%
•general rate dividend 39.7%
– capital gains
•personal 19.5%
•corporate flow‐through 20.4%
– since 2006, GRIP dividends allow corporate tax
deferral – 25% vs. 39%
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13. Farm Tax Planning
•Lifetime Capital Gain Deduction
– $750,000 per individual for QFP or QSBC
– savings in Alberta of up to $146,250
– watch for alternative minimum tax
– real property in corporation or leave in individuals
hands (rollovers, integration, corporate finance)
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14. Farm Tax Planning
•Inter‐Generational Rollovers
– spousal and CLP rollovers available for farm and non‐
farm property
– children – s.73(3) – a powerful planning tool where
farmer transfers land, depreciable property or ECE
– often used where another person is added to title
– child, grandchild, great grandchild or wholly‐
dependent before age 19
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15. Farm Tax Planning
•Inter‐Generational Rollovers
– children – s.73(4) – a powerful planning tool where
farmer transfers shares of a family farm corporation or
an interest in a family farm partnership
– child, grandchild, great grandchild or wholly‐
dependent before age 19
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16. Farm Tax Planning
•Reserves
– children – s.40(1.1) – a reserve up to 10 years may be
claimed by taxpayer where property disposed to a
child
– property includes farmland, shares of family farm
corporation, interest in family farm partnership, QSBC
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17. Estate Freeze
•Not necessary for tax purposes if farm property
rollovers can be utilized
•Useful as a business tool to introduce spouse, CLP,
children or other persons to the ownership
•Consider use of trust to maintain control
(addictions, marriage breakdown, death)
•Watch for corporate attribution provisions in
s.74.4 – very easy to miss this
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18. Will
•Must be done before incapacity
•Sets out who is in charge and what is the plan
•Keep family out of court
•Name Executor/Trustee
– trustworthy
– at least one executor who knows how to run a farm
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19. Will
• Make specific decisions about farm land, machinery,
livestock and home quarters
• Don’t leave all the decisions up to the executor and the
beneficiaries
• Consider trusts for tax reasons or for dealing with
problems such as disabled children or addictions
• Set deadlines on when the farm will be sold or
transferred
• Distribute personal items (jewellery, china, etc.) – have a
set of directions…. choose in birth order, have a sale, have
a list of items and who will receive them
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20. Joint Assets
•Loss of control
•Loss of tax exemption
•Subject to creditors of joint owner
•Confusion in respect of ownership
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21. Assets Passing Outside the Will
•Life insurance
•Pensions
•RRSP and RRIF
•Tax Free Savings Account
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22. Pre‐Retirement Estate Planning
•Retiring allowance – service prior to 1996 ‐ $2,000
per year plus additional $1,500 prior to 1989 if
not a member of a company pension plan
•Individual Pension Plan – may permit accelerated
tax‐deferred contributions
•Use of Holding Corporations – may defer personal
taxation – avoid OAS grind
•Trust – use as a Will substitute – powerful
planning tool
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23. Farm Tax Estate Planning
•Bequest to Child
– general rule is that property is deemed disposed of at
death at fair market value
– s.70(9) provides exception to general rule for land and
depreciable property
– s.70(9.2) for family farm corporation or interest in
family farm partnership
– elect between FMV and cost
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24. Farm Tax Estate Planning
•Rights and Things – includes amounts deducted in
computing income such as inventory of cash basis
farmer or deferred cheques
•150(4) separate return if 249.1(4) applies
•USA – buy/sell provisions may eliminate spousal
or CLP rollovers – incorporate put/call provisions
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25. Farm Tax Estate Planning
•Reserves at death
– generally no reserve may be claimed in the year of
death
– exception occurs where the right to receive an amount
is transferred to spouse, CLP or spousal trust
– reserve deducted by deceased and included in income
of transferee
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26. Questions?
Doris Bonora
780 423 7188
doris.bonora@fmc‐law.com
Mark Woltersdorf
780 423 7250
mark.woltersdorf@fmc‐law.com

27. The preceding presentation contains examples of the
kinds of issues people dealing with estate and tax
planning could face. If you are faced with one of these
issues, please retain professional assistance as each
situation is unique.