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A farm to inherit can be thrilling and intimidating. Many individuals don’t, but some people are particular about what they want to do with the property. Before making the final selections, there are a lot of queries and problems that need to be resolved.
Deciding what to do with inherited farm land has become more crucial. Owners of farmland are getting older on average. The average age of the main farm operator was 57.5 years old, according to the 2017 Census of Agriculture. Farmers over 65 had the fastest rate of operator growth. Additionally, the average age of landowners has also increased.
You could have some concerns about the procedure if you have recently inherited new property or are thinking about transferring ownership of a farm to the next generation to be sure you have met all of your legal requirements.
Depending on the circumstances, producers who receive land may not be subject to the same legal obligations as those who handed it to them.
Frank Arnold, a master financial advisor with Future Plus Professional Services, stated that the person or entity selling or giving the property has the true tax liability, not the person or entity receiving it.
But if a family member passes away before the inheritance is received, “the person who inherits a property, especially through a will, is typically also the executor and is therefore responsible for completing all tax liabilities of the deceased.”
Even though inherited property is often exempt from taxes in Canada, a farmer who inherits land should keep a precise record of its market worth at the time of receipt. According to a Personal Tax Advisors article, if the farmer who inherited the land decides to sell it in the future, knowing the asset’s worth at the time of inheritance will help them calculate how much capital gains tax they will owe.
Planning ahead is necessary for people who are thinking about transferring their property to family members or neighbours in order to reduce their tax obligations. Farmers in this circumstance, for instance, should take additional measures beyond the designations stated in their wills.
I wish elderly individuals who have worked so hard to accumulate money and want to pass it on to the next generation knew that planning for land inheritance is necessary if you want to avoid sometimes unpleasant tax repercussions.
The load placed on the following generation can be lessened by creating and adhering to a plan.
If the family had not arranged for land gifting, the decision about what to do with the inherited property would be based on the answer to the straightforward inquiry: Do you need to sell in order to get the funds necessary to pay the decedent’s taxes and settle any other debts?
Fortunately, proactive thought and thorough planning can assist farmers and their families in avoiding such choices and the heavy taxes that come with them.
“Farmers who have developed their businesses over a lifetime or who are already second or third-generation farmers are aware that there is a transition period from one generation to the next. To carry out this succession successfully, certain planning is required,
Farmers might get assistance from knowledgeable financial professionals with the inheritance process.
If the businesses are more incredible, the exemption reduces the tax burden, according to Arnold, who added that the capital gains exemption regulations for farmers make a shift possible without any financial repercussions.
Finding a qualified tax counsel who can assist you in understanding the effects of gifting, selling, or inheriting land and who can assist you in developing a strategic plan for the situation is the best way to prevent or minimise tax repercussions.
He continued to cover all aspects of the strategy, “it is crucial that the professional tax works together with other specialists, such lawyers.
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