Many farmers face a complex set of decisions when they want to kick off their retirement and transition their business (assets and/or operation).
What happens when your children do not have the lifelong dream of taking over the farm? Or maybe you don’t have children to inherit your estate? Or maybe there are too many siblings with conflicting financial goals? There are a variety of estate planning options to consider as part of your retirement goals.
Most farm estate planning articles don’t discuss developing your land. Here we will explore this additional retirement strategy or combination of strategies that you may have not considered. Please note that every situation is different and should be reviewed in-depth with a qualified accountant/lawyer/financial planner to minimize your capital gains.
Below we will gloss over a few traditional farm retirement strategies:
1) Gifting your assets to your children or grandchildren
2) Selling your farm as-is to family members
3) Selling your farm as-is to an outsider
4) Setting up a trust
5) Keep your asset and hire employees to take over your operation
And finally, a less discussed option that we will review more in-depth:
6) Subdividing, servicing, developing, selling off parcels of your land and/or leasing your developed land (or any combination of these activities).
The average farmer in Canada has approximately 315 hectares of land (2011 census) and Saskatchewan farmers leads the way with an average of 608 hectares of land (2011 census). The average Alberta farmer has an average of 411 hectares of land (2011 census). Developing farmland can be a profitable endeavor and as civil engineers we will consider a variety of factors to determine if the site development project is feasible, such as:
1) Existing services – water, sewer, gas, power availability or suitability
2) Soil types – septic field suitability, foundation requirements, suitability for road and lot grading.
3) Detailed design on the development. What kind and how many parcels will be subdivided.
4) Proximity to major road networks.
5) Municipalities rezoning options. Some municipalities have more restrictions than others.
6) Cost to develop. 7) Are there parcels of land that can’t be developed (wetlands, landfills, environmental reserves, potential contamination, etc.)?
8) Type of development (commercial, residential, industrial)
9) Location. Is the area in high demand and can it be sold for a profit? Maybe only a portion of the land can be subdivided. Your strategy may included developing a smaller portion of your farmland and gifting the rest to your family members.
10) Development stages.
11) Stormwater management requirements
12) Your vision and goals
You don’t have control over your heir’s interests or the ever-changing tax rules. However, we challenge you to explore our less discussed option when it comes to estate planning, passive income and maximizing your long-term business potential for you and your family.
Our team of civil engineering experts will provide a comprehensive range of site development options to ensure you are maximizing your potential.