BC's 1st Forum on agriculture and the environment, part of ARCORP's Agriculture Environment Initiative was a success. This invitation-only event, held in Richmond, BC on Oct. 30 was filled to capacity.
If you are a part-time farmer who has reported restricted farm losses in the past, a recent Supreme Court Canada decision may be in your favour.
On Oct. 2, BCAC made a presentation and a written submission to the Provincial Budget 2013 Consultation through the Select Standing Committee on Finance and Government Services. A summary of our recommendations included:
· Reducing the cost of doing business in BC, increasing investment in BC.
· Increasing sales of BC food products by educating consumers on the broader societal benefits provided by BC farmers and ranchers.
· Supporting membership in farm organizations to assist in the effective transfer of knowledge to producers.
· Implementing a GST like rebate approach to the PST system and income tax linked incentives, such as tax credits or accelerated depreciation rates to increase investment
· Increasing economic activity in agriculture while discouraging land speculation by strengthening the ALC and linking agriculture programs to active farmers.
· Exempting agriculture from the Carbon Tax.
· Allowing farm workers to bank some hours during busier season to reduce dependency on EI programs when work is not available.
Packaging Stewardship – for farmers who sell packaged product into the BC Retail system
As part of the on-going discussions regarding packaging stewardship, a meeting with industry representatives and Multi Materials BC was held on Dec. 3. Participants focussed on the practicalities of packaging in BC agriculture. Participants support recycling, but agreed the administrative costs for small farm businesses under the current proposal is prohibitive and puts BC agriculture producers at an uneven playing field with other jurisdictions. Implementing a single approach was identified as a challenge to the BC’s diverse agriculture industry. Clean Farms’ experiences in other provinces are being used to identify best practices that could be used in BC.
As a BCAC Farmer ID Cardholder, you have access to the professional farm estate planning services arranged by our administrator STRATA Benefits through the Daystar Financial Group. Daystar has offices in Vancouver, Victoria and Nanaimo and services BC farmers through their team of independent professional advisors in rural BC.
As an example the story below demonstrates just how easily problems can arise.
Joe and Jane had three children – two sons and a daughter. All three children did farm chores when they were growing up, and were treated equally and fairly by Joe and Jane.
The oldest son went to school with his parents’ help, and became a lawyer. The daughter did the same and became a teacher. The youngest stayed at home and started farming, initially working for Joe for a few years, and then buying his own land by age 20, with Joe as co-signer at the bank. When the son started out Joe helped get him established, but the son also helped his dad a lot too.
This “family-business” relationship slowly evolved into an informal partnership when, together they purchased more land. They continued to work this way, – and together they built up a very good sized “joint” operation, although no formal agreement or farm estate plan was in place.
There were rarely any disagreements, and overall both father and son were happy as the business grew.
The professional children (lawyer and teacher) did fine also. Both married other professionals and had families of their own – and were well off financially. Neither came home to help on the farm.
Unfortunately, the unexpected happened and at age 62, Joe died of a heart attack. The Will left everything to Jane, and also stated that on her death all the farm assets would go to the farming son along with ½ the land. The other ½ divided equally between the other 2 children.
They had saved about $400,000. Financially, she was going to be fine, especially with rental income from the land and would receive CPP in a few years.
The lawyer son helped Jane settle the estate. However, he and his sister didn’t like the Will and they started scrutinizing the farm from a distance, asking questions about their brother’s financial arrangement with their parents.
· Where did the money come from for the new tractor? The new ½ ton?
· Don’t you think you owe mom for this?
Now things got heated when it was obvious that both older siblings felt that the youngest was getting more than his share. After all, they reasoned, Dad helped him get established on his own. The farming son, on the other hand, felt Joe’s will was fair, especially since his siblings would just sell the land they were getting (land that he could be renting from Jane and maintaining).
This is the exact recipe that has the potential to rip the farm and the family apart.
You can avoid any such scenario by remembering that your farm is your BIGGEST asset.
Unfortunately, as with most farmers, you most likely have a lack of liquidity, and this makes dividing your estate extremely difficult.
The simplest, safest, least stressful and most family supportive way to solve this issue is to purchase and incorporate life insurance into your farm estate plan.
It is the most cost effective way to create liquidity within your estate. Your children can receive a fixed amount, instead of “their fair share” of a business that they did not build, but is a big source of keeping the farm financially stable for your farming child, who may now need to hire an employee.
There is a formula that Daystar Financial feels can be applied to most farms. It takes into consideration both after-tax values the non-farming children will receive and the “sweat-equity” used to build the farm to where it is today. This formula will help you find the right insurance benefit that can be passed on to and satisfy reasonable non-farming children. This plan will help you determine the most cost effective way to provide for a fair distribution of the estate, and also reduce the tax burden on children.
As an example, life insurance can have the same after-tax benefit as a GIC that earns over 15 per cent annually. The cost goes up with age, so the more you buy early, the better. In the example above, Jane, at age 60 would pay under two per cent annually. (ie a $1.0 million of life insurance coverage would cost $20,000 of premium per year). With a Joint last-to die coverage, had Joe lived long enough to plan, would have cost just over one per cent per year, or about $12,000 of annual premium per million of life insurance.
Of course it is imperative that you communicate with all of your children about your estate plan. (eg. “We want the farm to stay with the farming son and to make things fair, the farm will be investing in life insurance to give non-farming children, who have played a part in the past, a fair share of the estate too.”)
For more information about the BCAC Farmer ID Cardholder Estate Program, call our Benefits line at 1-800-663-5793, or firstname.lastname@example.org