Death, divorce, disability and disagreement. While not all are inevitable, Laura McDougald-Williams, a partner in the Meighen Haddad Law Firm told an audience at CropConnect in Winnipeg in mid-February that it’s wise to protect your farm against the “4 Ds.”


The first D is inevitable. You need a will. This is especially important, McDougald-Williams said, if you have a blended family. If you die without a will, there may be “surprising and unwanted results.” As your family circumstances change, keep your will updated. 


Your “estate,” McDougald-Williams clarified, includes “assets that are in your name alone at the time of your death.” Assets that are jointly owned, or life insurance proceeds after your death are not part of your estate. Working with a lawyer can help you lower estate administration costs after your death. “Ideally,” she said, “the best estate planning would be no estate — you would die broke, or without much of anything to administer at the time of your death.” 


If you die leaving significant assets in your estate, “your executor may be required to get a probate order” to deal with them after your death. In Manitoba, there is a probate tax of 0.7 per cent.


McDougald-Williams described an elderly Manitoba couple. “The husband passed away, and it was discovered after his death that all of the land was in the husband’s name alone.” He had more than $1 million worth of land. The couple paid $7,000 in probate taxes. There are also proscribed legal fees in Manitoba — in this case, $13,000. The widow would have needed $20,000 to transfer the land into her name. If a lawyer had arranged the transfer before the man’s death, “it probably would have cost him about $500.” 


Land transfer taxes can also be an issue. While farmers are exempt, there are circumstances where you may not qualify. For example, if you wait until after you retire from farming, you will pay the land transfer tax.


Capital gains taxes may also be a problem if you haven’t consulted with an estate planner before your death. McDougald-Williams says “there are pretty narrow definitions for the land that qualifies,” for the Farmland Capital Gains Tax Exemption. ”


She gave an example of a farmer who owned a half section of land that he’d inherited from his parents. His non-farming brother had a 30 per cent interest in the land, on the land title. Because the non-farming sibling was involved, “that land did not qualify for the Capital Gains Tax Exemption.”


Renting land out can also complicate your qualification to receive the Capital Gains Tax Exemption. 


Plan ahead, in case you become disabled through sickness or an accident. Make sure you’ve planned for power of attorney and health care directives, so someone else can make decisions for you if this becomes necessary. 


If you don’t have those documents in place, your family will have to go through the expense and hassle of applying for them. 


McDougald-Williams reminded the audience that “the divorce rate in Canada is about 41 per cent.” And, as McDougald-Williams said, “the effects of a divorce on the farm can be devastating.”


While laws will vary by province, keep in mind that your spouse may be entitled to “asset equalization.” You may be required to share 50 per cent of the increase in value of your assets that occurred during your relationship. In these times of rising land prices, that could be a significant amount — possibly enough to require the sale of land.


While many farmers believe a handshake is still enough, McDougald-Williams advises you to get a written agreement. This would apply to employment agreements, land rental agreements, partnership agreements and operating agreements.


As an example, McDougald-Williams talked about land rental. “Your landlord may seem like a reasonable, nice guy.” But if he dies “without a written contract in place, now you’ll be dealing with his executor or his family. You have no idea if they’re as kind and reasonable as he is, or if you’ll be able to farm the land.” 


Dealing with lawyers can make your life easier when or if one of these four “Ds” comes to pass on your farm. Make sure you have in place “tools to make these difficult life challenges a little easier,” McDougald-Williams said.