By Nerissa McNaughton
Over this series, you met Derryn Shrosbree, the man behind the mission to ensure farming families never have to endure the heartache he did when a lack of continuity planning tore him and his siblings apart. You learned manageable, actionable steps to secure your legacy now, and ways to ensure the family farm produced generational wealth, even for the family members who moved off the farm to pursue other interests. You learned how, as the senior members of the family, to continue to be active and engaged by investing in real estate for passive income. And you learned how all of this can easily happen with just one phone call to 33seven.
So, if you missed any parts of this series, or just want a handy checklist, here is a recap showing how continuity planning does not have to be a frustrating, costly, time-consuming task. All you need to do is – start.
Step 1: Valuate Your Farm and Set the Structure
Shrosbree says, “The first step on this journey is valuating your business and thinking about incorporation – if you are not already incorporated. Cash flow isn’t always farm-generated; a valuation can include social benefits like tax credits, insurance and government benefits. Income from personally owned farmland must be reported on personal tax returns, potentially reducing these benefits. Incorporating allows farmers to strategically manage income, improving eligibility for such benefits.”
This foundational step sets the stage for all future decisions and strategies. Start by determining whether your farm operates as a sole proprietorship/partnership or a corporation, as this distinction significantly impacts taxes, liabilities and financial planning. Corporations, for example, offer lower tax rates, better protection of personal assets and strategic advantages for managing income and benefits.
Additionally, consider factors like capital gains exemptions, which can unlock up to $1.25 million per individual for eligible farm property. A comprehensive valuation should account for all aspects of your farm, from financial statements to social benefits, ensuring a clear picture of its worth.
Step 2: Leverage the Right Type of Life Insurance
Leveraged life insurance offers farmers a strategic solution to secure their farm’s future while maintaining financial flexibility. As Shrosbree explains, “You, the farmer, go out and buy a life insurance policy on your life paid for by the farm. Though the initial $100,000 premium may seem daunting, the farm borrows back the premium, leaving the same amount in the account as before. The only cost is the net interest on the loan, averaging $2,500 annually – or just $200 a month.”
This investment ensures the farm transitions seamlessly to the next generation without tax implications while preserving family harmony by providing options, such as cash and acreage, for all those involved.
Step 3: Be Strategic and Efficient. Decide Who is in Your “Tent”
He emphasizes the importance of involving family members in the process and working with a one-stop-shop firm for legal, financial and investment expertise. Every family’s “tent” is unique, with roles for both on-farm and off-farm children, and tools like continuity trusts and life insurance help equalize estates and safeguard assets amid rising farmland values. Strategic financial approaches, such as borrowing against life insurance premiums, allow farmers to fund plans while maintaining farm liquidity.
As the “ringmaster,” it’s up to the farmer to assemble the right people in the “tent,” ensuring a smooth transition and a united family.
Step 4: Write a Will and Power of Attorney (POA)
As Shrosbree bluntly states, “Without a plan, you’re just farming for the government, not for your family and not as a legacy.”
Despite its importance, less than 30 per cent of Canadian farmers have a will, which serves as a crucial “instruction manual” for asset distribution. A will prevents ambiguity and ensures the farmer’s wishes are followed. Equally important is appointing a POA to manage financial and health-care decisions in case of incapacitation, as well as selecting a trustworthy executor to handle estate administration.
Starting the process is much easier than many imagine, with tools and professional guidance making it quick and accessible. Once completed, wills and POAs should be properly signed, stored and shared with key advisors like lawyers and accountants. Regular reviews are necessary to keep these documents up to date with changes in family, farm or finances.
Step 5: Go Beyond and Ensure Generational Wealth in Perpetuity
Shrosbree emphasizes that when life insurance has been leveraged to protect the farm and provide for the next generation, the senior generation can further secure their financial future through a unique real estate investment strategy. By combining leveraged life insurance with multi-residential real estate projects financed through the Canada Mortgage and Housing Corporation (CMHC), the senior members of the farm family can generate passive income without additional effort.
Professional firms like Generational Wealth Inc. manage the entire process, allowing families to reinvest their initial capital, create retirement income and build generational wealth.
This approach ensures financial security for both on-farm and off-farm children while providing peace of mind for future generations.
Why Isn’t Everyone Doing This?
With one call and professional guidance every step of the way, every farmer in Canada can secure their legacy and invest in generational wealth. It sounds too good to be true, but it is not. This is reality, and for those who have taken the initiative, it is their current and active reality. It’s not new; it’s just new to you.
So, why are so few farmers on board? Why does Shrosbree bemoan the fact that for every 10 farmers, two will consider the steps above and only one will make the call?
He likes to say, “You bring up things like this, and people would rather pour gasoline on themselves and light a match!”
It’s a bold statement borne of frustration but, despite being cheeky, it is true. Discussions about life insurance … or look at that new combine. Write a POA … or go out seeding. Get the right people in the tent … or focus on harvest. For busy farmers, the continuity discussion is easy to kick down the road. Sadly, though, many who do this find they run out of time, and what could have been a smooth and happy transition ends family harmony – and quite often, the farm itself.
The Path Forward
The simple truth is – the path is not difficult. With help from 33seven and Generational Wealth Inc., the hardest step is simply making the choice to get started. From there, it is all handled in a way that is easy to understand and manage.
If continuity planning has been on your mind, or if this series has sparked a desire to secure the family farm’s legacy now, take that step and make the call.
Your future generations will thank you.
