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Assante Ag-Group Newsletter Archive


Volume 20

AAG - National Newsletter - Volume 20A Cautionary Tale: DIY Income Splitting With Children

– Wealth Planning Group

Christmas was filled with surprises for the Jones family a couple of years ago. On Christmas morning, Amy, Brad and Crystal, ages 21, 17 and 15, woke up to find a silver envelope for each of them under the Christmas tree. Each envelope contained a cheque from their parents for $50,000, 10 common shares of Disasterco (their parents’ data recovery business), and a cheque for $100,000 from Disasterco with the word “Dividends” written on the subject line. Christmas was especially good that year! Or so they thought…

Disasterco had experienced an exceptional year and was flush with cash. Already in the highest tax bracket, Bill and Sue wanted to devise a strategy to reduce their personal income by allocating some of the income to their children. Read more...


Volume 19

AAG - National Newsletter - Volume 19Are your heirs prepared?

– Wealth Planning Group

Through hard work and perseverance, Mark grew his modest farm into a very successful farming operation before he sold it. At his death, Mark’s children were surprised to find that their father had amassed an estate worth over $6,000,000.

During his lifetime, Mark had taught his three children the value of hard work and they all had good careers: Mary was a veterinarian, Joan was an accomplished professional musician, and Peter was an accountant. Each of them reacted very differently to their new wealth. Read more…


Volume 18

AAG - National Newsletter - Volume 18Succession or Retirement from your farm – Tax exit strategy concepts to consider

– Brian Krysowaty, B. Comm., CA, Consultant, Wealth Planning Group

Across the country, spouses, siblings and parents with children are discussing what should be done with their family farm. Should we sell it when the time is right, pass it down to the next generation or work alongside our children until they are ready to take over the family farm? Countless discussions, sleepless nights and likely the odd argument have taken place and with no real plan for the future in place. In looking at succession plans and/or retirement plans with the eventual sale of the family farm, one should consider various income tax considerations that could in the long run, limit the income tax exposure to you and your family. Read more…


Volume 17

AAG - National Newsletter - Volume 17Wealth Planning and the Family Farm

– Cédric Paquin, B.Comm, CA, CFP, Regional Vice-President, Wealth Planning

Wealth planning is a process that should begin with a detailed review of all aspects of your financial life and a thorough understanding of your personal situation. The purpose of a Wealth Plan is to create a customized road map that you can follow to position your assets in a way that will help achieve your objectives in the most tax efficient manner. There are various tools in the income tax act to help farmers mitigate tax on the sale of farm assets or on a transfer of farm assets to the next generation. As a result, tax is often the driving force behind many planning strategies. Read more…


Volume 16

AAG - National Newsletter - Volume 16A “Freeze” in Anticipation of a Future Farm Asset Sale

– Sean Rheubottom, B.A., LL.B., TEP, Regional Vice-President, Wealth Planning

Thinking ahead may help you stay clear of income attribution rules.

What’s a Freeze?

A corporate “freeze” structure is achieved basically by exchanging your common or “growth” shares for preferred or “freeze” shares that do not grow in value. New common shares are then issued to other family members or to a trust for their benefit. There are three main goals in implementing a freeze:

• Tax savings through income splitting can be achieved by paying dividends to adult family members as shareholders or as beneficiaries of the trust; Read more…


Volume 15

AAG - National Newsletter - Volume 15Farmland is not just for farming!

– Cédric Paquin, B.Comm, CA, CFP, Regional Vice-President, Wealth Planning

Entrepreneurial farmers across Canada have found various methods of earning multiple streams of income from their farmland, many of which do not relate to farming! This article provides a brief overview of the taxation of a few of these sources of income.

Sale of Mineral Rights

Mineral rights are Canadian Resources Properties (CRPs) for purposes of the Income Tax Act. Unlike capital property (where only half the gain is taxable), the gain on a disposition of CRP is fully taxable. Read more…


Volume 14

AAG - National Newsletter - Volume 14FAQ’s – Incorporating the Family Farm

– Cédric Paquin, B.Comm., CA, CFP, Regional Vice-President, Wealth Planning

In working with many farming families over the years we are often asked questions about the benefits of incorporation and whether it is right for them. Like everything tax, the answer is never simple. Decisions must be made after carefully analyzing all of the facts including the family’s financial situation, estate and succession planning objectives. In this article, we have summarized the most common questions we are posed when it comes to incorporating the family farm.

How much tax will I really save?

The Canadian tax system is well integrated and there is very little tax difference to earning income personally or through a corporation in the form of a salary or a dividend. Read more…


Volume 13

AAG - National Newsletter - Volume 13What do you mean my farm is not a farm?

– Cédric Paquin, B.Comm, CA, Regional Vice-President, Wealth Planning

The tax rules related to the farm rollover and the capital gains deduction contain many twists and turns. Careful planning is required to make sure your farm qualifies for these preferential tax provisions.

Poor planning leads to poor results

Nobody understands this better than Jordan. Jordan inherited farmland from his father Paul last year. Unfortunately for Jordan, attached to the farmland was a very large tax bill. He is now faced with a difficult decision; take out a loan or sell the land to pay the income taxes. Read more…


Volume 12

AAG - National Newsletter - Volume 12Breaking the snowball effect on tax deferrals

– Cédric Paquin, B.Comm, CA, Regional Vice-President, Wealth Planning

Have year end input purchases ballooned to the point you worry about what might happen if the balloon pops?

Peter was in a pickle. He has operated his Manitoba farm as a sole proprietor for the past two decades. Like most farmers, Peter has been reporting farming income on a cash basis for tax purposes. For as long as he can remember he’s been playing the deferral game. You know the game: it involves reducing the current year’s taxable income by purchasing inputs for next year’s crop. Read more…


Volume 11

AAG - National Newsletter - Volume 11Farm quota: Can you “roll” it to your children?

– Brent Steele, B. Comm, CA, CFP Regional Vice-President, Wealth Planning

Waiting to transfer your egg, milk or other quota until your death may result in a missed tax saving opportunity for you and your family

A farmer may wish to transfer the egg or milk quota they personally own to their children. But often there’s uncertainty about whether to do the transfer while they are alive or wait to do it at death. One thing that may impact the decision is whether they plan to use their $800,000 capital gains exemption (CGE) on the transfer, an option that is not available on death for quota. Read more…


Volume 10

AAG - National Newsletter - Volume 10Tax, Financial and Estate Planning: Are you Overdue for a Check-Up?

– Sean Rheubottom, B.A., LL.B., TEP, Regional Vice President – Wealth Planning

Start with a checklist and work on filling in areas of uncertainty.

Many farm families admit they are overdue in getting organized when it comes to tax, financial and estate planning. It’s hard to know where to start, and therefore it’s easy to procrastinate.

Planning Starts with You and Yours

Your values and goals may be quite different from your neighbour’s, not to mention your spouse’s, or your children’s. Read more…


Volume 9

AAG - National Newsletter - Volume 09Investment income of a corporation: problems and solutions for interest, capital gains and dividends

– Sean Rheubottom, B.A., LL.B., TEP, Regional Vice President – Wealth Planning

Corporations may accumulate cash, for good tax reasons. But once the cash is invested, there are new tax problems to overcome

In our previous newsletter we noted that as a result of the tax deferral on corporate farming income, it’s common to see cash and investments held inside a corporation. Unfortunately, when it comes to investment income produced by that cash, the total combined or “integrated” corporate-personal tax cost can be a bit higher than it would have been without a corporation. Read more…

 


Volume 8

AAG - National Newsletter - Volume 08The Partnership Transfer Strategy

– Sean Rheubottom, B.A., LL.B., TEP, Regional Vice President – Wealth Planning

For Albert and Dorothy, a “Partnership Transfer Strategy” will save several hundred thousand dollars in tax.

In the last volume we introduced Manitoba farmers Albert and Dorothy who plan to sell inventory and equipment, which will result in $800,000 of taxable income. With no planning, most of this income will be taxed at the highest marginal rate of 46.4% when added to their other income. Albert and Dorothy together could easily see a tax bill of close to $400,000. Not planning is not an option. Read more…

 


Volume 7

AAG - National Newsletter - Volume 07Selling Farmland That Includes Your Principal Residence

– Donavon K. Tofin, B.Comm, CA, CFP, Assante Financial Management Ltd.

With the right advice, you can minimize taxes on the sale of your farmland.

Selling farmland can be complicated. For Gordon and Helen, who recently sold their farm including their principal residence, the tax implications were even greater. Although Gordon and Helen have joint ownership of the farmland, Gordon held “beneficial ownership” for income tax purposes. This meant that the entire capital gain would be included in Gordon’s income.  Read more…

 


Volume 6

AAG - National Newsletter - Volume 06Estate Planning: Frank’s Story

– Bruce McQueen*, BA (Econ)

With good advice, estate planning doesn’t have to be an emergency

When a client procrastinates in dealing with their Wealth Planning, I’m often reminded of my long time friend and client, Frank. In 2007 Frank accepted a rather grim medical prognosis with his characteristic stoicism. He’d long suspected his illness would return after his first bout many years earlier. What did unnerve Frank was not the illness — he feared that his remaining time wouldn’t be sufficient to complete the estate planning he should have done a long time ago. Read more…


Volume 5

AAG - National Newsletter - Volume 05Sale of Milk Quota by a Farm Corporation

– Sean Rheubottom, B.A., LL.B., TEP, Regional Vice-President, Wealth Planning

Ted and Barbara are dairy and cattle farmers planning to retire and sell farm assets. Their corporation, T&B Farms Ltd. owns milk quota worth $2,000,000. They also personally own farmland which they intend to keep.

Ted and Barbara transferred their quota to T&B Farms Ltd. several years ago when it had a cost base of $400,000 and value of $1,000,000. On the transfer they each triggered $300,000 in capital gains, using their capital gains exemptions (“CGE”) to shelter the gains from tax. Since that time they’ve each used up the rest of their $800,000 CGEs. Read more…


Volume 4

AAG - National Newsletter - Volume 04They Say You Can Pick Your Friends…

– Bruce McQueen*, BA (Econ), Wealth Management Advisor

…but you can’t pick your family! Isn’t it funny that in almost every family there seems to be at least one personality that wants to swim against the current when it comes to family matters.

When we’re assisting farm families with planning for the eventual sale or transition of the family farm, we have to address the reality that parents may pass away unexpectedly before their plans can take effect. Nobody likes talking about death, but unfortunately it can happen at the most inopportune times. Read more…


Volume 3

AAG - National Newsletter - Volume 03A Succession and Retirement Plan for a Farm Corporation

– Don Tofin, B.Comm, CA, CFP, Senior Financial Advisor

Address your own retirement needs as well as your desire to pass the farm to a child

Canadian farm tax rules allow flexibility in transfers from parents to children. The capital gains exemption can shelter up to $750,000 in gains, and the “rollover” provisions allow for the tax free transfer of certain farm assets to children where no cash is exchanged. The rollovers are nice for the succeeding generation, but what about cash needs of the retiring generation?

Gordon and Helen felt it was time for them to retire from the farm and allow their farming son and daughter-in-law, Mark and Kelly, to continue the family farm.. Read more…


Volume 2

AAG - National Newsletter - Volume 02So You ’ ve Retired – What Happens Next?

— Paul McVean, BAccS, CGA, ACCA(U.K.), CFP, Regional Vice-President, Wealth Planning

New wealth and tax planning issues arise afer the sale of farm assets

Although selling the farm was rewarding in the end, Reg and Emily found it to be a long and complex process. By the time the sale was complete, they had had their fill of working with accountants and lawyers, having received lots of good advice regarding the sale and succession of their farm. For many retiring farmers, that’s where the involvement of their existing professional advisors tends to cease, because the planning is focused solely on the sale or succession transaction. But from a holistic wealth planning standpoint, a large question remains: What do we do now? Read more…


Volume 1

AAG - National Newsletter - Volume 01Do We “Need” Life Insurance?

– Bradley C. Charlton CLU, CHFC, RHU, Regional Vice-President, Estate Planning

Some farmers “need” life insurance and some don’t. Others “use” it in their estate and tax planning.

In our younger years most of us recognized the “need” for life insurance. We had debt and our children were young. We needed insurance just to provide for our families if something unfortunate happened. But as we enter our ‘golden years’ we may wonder if we need insurance anymore.

Your answer to this question may very well be ‘no’. After years of hard work you may be reasonably debt free and financially comfortable. Your children are grown and finished school. Read more…