If you read this article early enough, you can make it to Elaine Froese’s seminar at Thompson Rivers University on Friday, April 15 from 8:30 a.m. until 4 p.m. Elaine is known for her professional work with farm families in succession planning across Western Canada.
Unfortunately, it is bull sale day, too, at the BC Livestock Co-Op. That is important too for those ranches needing to add or replace bulls.
Elaine’s topic is sort of like this: it is never too early to plan for who will succeed you in the management and ownership of the family farm or ranch; usually it is not too late unless you die before you create a plan.
Succession planning has been the major focus of the Applied Sustainable Ranching Program this week. It is one of the modules of the Sustainable Enterprise Course. The students will be creating a business plan and need to know about the benefits of succession planning.
During a previous seminar sponsored by the Ministry of Agriculture, one of the presenters said of one Cariboo/Chilcotin Ranch, that the dad was in his 80s and the son was early 65 and still on the ranch, maybe hoping to take over one day.
The main point of this story is that the son had never seen the books of the ranch business! Now maybe the ranch didn’t keep books but that would be even worse.
And perhaps the son wanted to carry on and not retire, like his dad. But at some point there likely will be a huge tax bill, notably on the parents’ death, unless there was some transfer of the capital assets before the parents’ death.
If the ranch was debt free it might well not be after the parents’ passing, if the son wanted to take over the ranch, thanks to the capital gains tax.
Parents can pass on land capital assets and there is an exemption of $850,000 for each parent, so if the gain in the value of the ranch land hasn’t exceeded $1.7 million since Valuation day (sometime in the 1970s) the tax bill is substantially reduced, say by hundreds of thousands of dollars.
The children can’t receive the exemption. It has to be claimed during the lifetime of the parents. You need some books on the original and present value of the land.
This is complicated. Seek advice of a professional accountant.
There is a lot more to farm succession planning. Who will operate the farm and what is the role financial and otherwise of the siblings not working on the farm.
And, if you are not retiring for some time but have children, you might want to ensure that the unpaid work children do is recorded so when it comes time to sell or pass on the ranch that work is credited duly.
Elaine Froese can help if the family needs coaching and professional advice.
The seminar today is a bargain at $200. Or you can Google Elaine’s site (her name) and get started with some free advice. You get what you pay for in the succession planning business.
David Zirnhelt is a member of the Cariboo Cattlemen’s Association and chair of the advisory committee for the Applied Sustainable Ranching program which started at Thompson Rivers University in Williams Lake this January.