Understanding Fairness, Taxes and Planning in Farm Succession
The following article is a recap of “Harvesting the Future: Farm Succession Planning & Tax-Smart Strategies, “a presentation in our Roots to Results Webinar Series. The full webinar recording can be viewed here.
Succession planning isn’t glamorous. It’s uncomfortable, emotional, and often pushed off until “next year.” But waiting too long can cost you more than just taxes. It can also cost you peace of mind.
In our recent webinar, MNP tax specialist Edith Frison shared real-world stories from decades of working with farm families. Her message was clear: good planning protects both the farm and the family.
Succession planning isn’t just paperwork. It’s a gift that preserves relationships, protects the land, and gives the next generation a fighting chance. Start early, ask questions and create a plan as strong as the farm you’ve worked so hard to build.
Your Will Is the First Gate to a Smooth Succession
Too often a missing or outdated will sends an estate to court, where assets are split “equally” not “fairly.” That’s how non-farming siblings end up owning land they never intended to operate.
Implementation
- Set a reminder to review your will every two to five years. Keep it simple, keep it clear and talk about it with your kids so there are no surprises later.
Capital Gains Rules Can Make or Break the Next Generation
The capital gains exemption is a powerful tool, if used correctly. However, rules around land use, rental years, inactive assets and intergenerational transfers are complicated enough to trip up even the most seasoned operators.
Implementation
Make a list of every parcel you own. For each one, write down:
- The legal land description
- Who farmed it (including which family members or renters)
- How many years it was farmed versus rented
- Where it came from (when was it bought, was it inherited and, if so, from whom and how long had they farmed/owned it)
This small task can save your family hundreds of thousands in future taxes.
“Fair” Doesn’t Always Mean “Equal”
Splitting the farm equally between farming and non-farming children is often unrealistic. A daughter running a 5,000-acre operation simply can’t buy-out her brother’s million-dollar share overnight. There’s a difference between liquid and cash assets.
Implementation
Think in terms of fairness, not equality:
- Farming kids may receive land or shares
- Non-farming kids might receive cash, life insurance proceeds or non-farming assets
Written shareholder agreements can also ensure buyouts happen gradually, not all at once.
Be Careful Adding Kids to Land Titles
Adding a spouse or child to a title used to be common to avoid probate, but probate fees in Manitoba are no more. Today, this move can trigger a long list of new problems: land transfer tax, creditor risk, marital disputes and future tax complexity.
Implementation
Before adding anyone to a land title, ask your accountant or lawyer whether it helps or hurts your long-term plan.
Partnerships and Corporate Structures Matter More Than You Think
One of Frison’s strongest recommendations is don’t farm as a sole proprietor. Partnerships can reduce tax on death, provide access to more capital gains exemptions and make transitions cleaner.
Implementation
If you haven’t already, review your farm business structure:
- Could a partnership with your spouse or children reduce future tax?
- Should you remove inactive assets from your corporation?
- Will Bill C-208 allow for a smoother parent-to-child share sale?
- Bill C-208 amended the Income Tax Act to allow for the intergenerational transfer of family farms. It allows these transfers to be treated similarly to a third-party sale for tax purposes.
