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What Happens When a Farmer Dies

6 minute read

Death is not an easy topic, but it is a reality of life. This is often why estate planning and wills are left to the bottom of the to-do list for many people, including farmers. Yet for a farmer, their property is more than just a home. It is also a business and the family’s livelihood. As with any business owner, it’s essential to protect this business and its assets in the event of death.

In this article, we will outline key considerations for estate planning for farmers and explain what happens when the principal farmer dies. We will also answer another common question: what happens if a farmer dies without a will?

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Estate Planning for Farmers

Estate planning is an important part of any succession plan. Estate planning saves the family from having to make decisions at a difficult time. It also gives the farmer time to consider and make a decision on what should happen to the farm. If a farmer does not have an estate plan and will in place, the farm assets will be disbursed according to provincial legislation post-mortem and not according to their wishes. This undesirable circumstance may result in the forced sale of the farm to a third party in order to liquidize the estate’s assets.

Below we review key considerations when preparing a will, a succession plan, or when transferring farm ownership to the next generation.

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Creating a Will

A will is a legally enforceable document that provides instructions as to how a person’s assets and property are to be distributed after death. Yet, according to a survey in 2018, more than half of Canadian adults don’t have a will. The reasons are typically that they don’t have enough assets, are too young to die, or they simply don’t want to think about death. However, if you want to ensure the succession of your farm and that your beneficiaries are taken care of, a will is an important document to have in place at any stage of life.

A will typically appoints who will administer your estate, who will receive your assets, including farm assets and other assets, and who you wish to be the guardian of your children in the event you die while your children are minors. Wills can be as basic or as elaborate as needed, however, it’s important to keep in mind that a farm is a business so the will should be detailed to ensure it stands up to legal scrutiny. Where a family farm corporation is involved, a farmer may wish to have two wills, one that deals with personal assets and the other that deals with farm assets. This is an important estate administration tax saving measure as the courts typically only require the personal will to be probate and estate administration tax will then not be paid on the farm assets.

It is important to work with a lawyer to create the will and to have two witnesses to verify that the document was signed by the farmer while the farmer was capable to make decisions.

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Succession Planning

In conjunction with creating a will, a farmer should also create a succession plan. A succession plan will outline the transfer of knowledge, skills, labour, management, control and ownership of the farm business between one generation to the next. This should be a continuous process that starts long before the farmer is ready to retire or transfer the farm.

It’s also recommended that the plan become a collaborative document where the successor is involved in the development plan. This creates a more positive environment where both parties are committed to the same goals -- continuing the success and prosperity of the farm.

To assist farmers with developing a farm succession plan, we took a deeper look into the necessary components of a plan in another article.

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Transferring Farm Ownership

Another pre-planning option is to transfer farm ownership to a spouse or child(ren) prior to death. Once again this should be done in conjunction with having a will, but is another way to make life easier on the family when the farmer dies. If the farm ownership has already been transferred to another family member, it is one less aspect of the estate to include in the will.

In another article, we outlined the transfer of farm ownership to a spouse or a child in more detail and included information about the tax implications.

What Happens if a Farmer Dies Without a Will?

Dying without a will presents problems for the family left behind. The courts may appoint an administrator for the estate, who may not be the individual or institution the farmer would have chosen. This administrator will then distribute the estate in accordance to the intestacy rules in the province which may differ significantly from the farmer’s wishes. It may even be necessary to sell the farm in order to distribute sufficient funds to the beneficiaries.

In most situations, the bulk of the property would go to the next of kin, usually a spouse or children.

Remember that verbal agreements are not binding as a will. If it is not in writing and witnessed as a valid will, your wishes may not be followed.

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Start Pre-planning with a Lerners Agricultural Lawyer

You can clearly see the benefits to pre-planning and the consequences that could arise if a will is not created before a farmer dies. Peace of mind, continued success of the farm and protection of its property and assets are all at stake.

The Lerners LLP Agricultural Law Group can work with you on the best solution for your family and farm, including succession planning, estate planning and creating a legally binding will. For more information, please contact us at: 519-672-4510.

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