As they say, there are only two things in life that are certain, death and taxes! With land prices being as high as they are some of you might be considering selling the farm. After finally deciding to sell the farm, you are probably wondering how much tax you need to pay. The answer to that question is a great big DEPENDS. Everybody’s situation is different and it is really important to sit down with your financial advisor and your accountant and figure out the taxes for your individual circumstance. I cannot stress this enough! The sooner you do this in the process the better. I will however, go over a few of the more common questions I receive about selling the family farm.

Does selling farmland qualify for the Lifetime Capital Gain Exemption?

Yes Qualified Farm Properties do qualify for the LCGE, the key word being qualified. In order for farm property to be qualified it must meet the following definition: “Property must be principally used in farming by one of the qualified users, the individual, the spouse, child or parent of the individual or by a family farm partnership or corporation of the individual, spouse, child or parent. Property purchased prior to June 18, 1987 must be used in principally farming in the year of sale or have been principally used in farming for any 5 years during its ownership. Property purchased after June 17, 1987 must be owned for 24 months prior to the sale and in at least two years, the gross farm revenue of the qualified users who is actively engaged in farming the property must exceed income from all other sources or the property was principally used by a family farm partnership or corporation in a two year period during which time the individual, spouse, child, parent or partnership was actively involved in the farming business. In all cases, the qualifying individuals, whether farming as a sole proprietorship, a partnership or corporation, must be actively engaged in the day to day activities of the business”. In the eyes of the CRA” principally used” means "more than 50%" from either a time or usage perspective. This is particularly important when you are renting out your land. If you have rented out the land for greater than 50% of the time you owned the property it does NOT qualify for the LCGE.

Can I split the Capital gain with my Spouse?

Yes, if both spouses contributed to the purchase of the property, you can split the gains to reduce taxes. Although both may be on title, it is the contribution toward the purchase that is important”. Yes you both can use your LCGE.

The government allows a fair amount of flexibility when selling the family farm in particular if you are selling it to a family member. I can’t urge you enough to talk to a qualified individual to help you make the best decisions for your individual circumstance.

Gary VanMoerkerke is a Financial Advisor with Raymond James Ltd. The views of the author do not necessarily reflect those of Raymond James. This article is for information only. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. Securities offered Raymond James Ltd. Member-Canadian Investor Protection Fund. Insurance products and services offered through Raymond James Financial Planning Ltd., not member Canadian Investor Protection Fund.

I was sitting in a coffee shop in a small South Western Ontario town not long ago. It was a popular hangout for local farmers. There was a certain buzz in the air. A local farmer just sold his land for more than $20,000.00 an acre. Everybody in the room was doing the mental gymnastics of figuring out what their farm was now worth. They all had a satisfied grin on their faces.

There is no denying that land prices have risen exponentially over the past five years. Many farmers who have semi retired or are about to retire are asking themselves the same questions. Should they sell their land? Can the price of land move higher? To help answer these questions I will discuss 3 factors that have affected this rather dramatic rise in land prices. These factors being:

• Interest rates
• Commodity prices
• Farm profitability

Interest rates are hovering around all time lows. This means the cost of borrowing money to buy farmland is also at all time lows. The low rates are encouraging farmers to take on more debt. They are using this money to buy more land to expand their operations. Interest rates can certainly stay at these levels longer than what most people believe. They could even move a bit lower but eventually they will move towards more normalized levels and that $20,000 an acre land will become expensive to finance.

Farmers have enjoyed higher commodity prices due to an increased demand for their product. Ag Commodity inventories are sitting at precariously low levels. Last year’s tough growing season did not help this situation. Low inventories and the fact that the world needs to double food production by 2050, according to the UN, will likely mean upward pressure on commodity prices for the foreseeable future. However, a few good growing seasons would go a long way towards easing the inventory scarcity and bring agriculture commodity prices back to more historical levels.

Farm profitability has been strong due mainly to low interest rates and strong prices. However, that’s not the only reason why profitability has increased. The fact is farmers continue to get better at what they do. They have become more efficient and it shows in their profit margins. However, fertilizer, seed cost and land costs are not getting any cheaper and a real argument can be made for the fact that farm profitability has peaked.

In order for land prices to continue to move higher, I believe that interest rates need to move lower, commodity prices need to increase and farm profitability needs to increase. Can this happen? Of course it can. Is it likely? I’m not so sure.

Stay tuned for my next blog post. I will discuss tax implications of selling the family farm.

Gary VanMoerkerke is a Financial Advisor with Raymond James Ltd. The views of the author do not necessarily reflect those of Raymond James. This article is for information only. Securities offered Raymond James Ltd. Member-Canadian Investor Protection Fund. Insurance products and services offered through Raymond James Financial Planning Ltd., not member Canadian Investor Protection Fund

Choosing an executor for your estate seems simple enough. A trusted son or daughter, your spouse or maybe a close personal friend are all likely candidates. But, are you doing them an honour or saddling them with a burden? Individuals give a lot of thought to making out their Will. They should do the same when choosing an executor.

The executor (called a trustee in Ontario) named in your Will is your proxy. He, or she, or they assume all the financial and administrative duties of winding up your estate and see to it that what you want to happen with your assets is properly carried out. It’s a process that may stretch out for many months after you’re gone (and years in some cases).

It’s natural to want a family member or a close personal friend to be your executor, but it may not be practical for the following reasons: people emotionally close to you will be grieving; while a friend or family member may have your complete trust, their ability to manage your estate may be compromised by lack of business or financial experience; someone your same age may not outlive you; or the nomination of one child over another may create hard feelings.

Duties and Responsibilities of an Executor

Consider some of the financial and legal responsibilities of an executor.

• Register your Will with the provincial court.
• Prepare a complete inventory of your financial assets and liabilities and assume responsibility for them.
• Deal with various government agencies, banks, credit card companies, insurance companies, pension administrators and so on to finalize and close accounts.
• Meet with your creditors and review their claims on the estate.
• File all final tax returns (there can be several) and pay any capital gains tax owing on the deemed disposition of your estate’s assets.
• Assume control of your investment portfolios, property and business interests not covered by a separate Will or legal agreement and arrange for their sale or legal transfer to beneficiaries.

Clearly, reading the Will and distributing assets to your heirs and beneficiaries is only the last of a series of fiduciary duties. The majority of tasks expected of an executor are administrative. For that reason, an executor out of his or her depth can seriously affect the speed of settling your estate and possibly the value of your estate assets if they are not managed or disposed of properly.

Putting the right person in charge

There are several things you can do to ensure you get the best executor possible. If it’s a family member or personal friend that you want as an executor, first make sure they are prepared to take on the responsibility and are comfortable making such a commitment. If they live out of town, or if their business or profession won’t allow them the time to devote to your affairs, then it may be wise to have a second choice. Another option is to consider appointing more than one executor. Your lawyer or accountant or a business partner can bring the necessary business and administrative skills to augment those of a friend or family member. Keep in mind you’ll need to establish how to resolve disagreements affecting the estate.

Another possibility is to arrange with a Trust company or law firm that specializes in estate administration to be designated as your executor. In complex estate matters this may be the best course of action. Compensation for their services is usually based on a percentage of the value of the estate.

Simplify the job ahead

Finally, don’t leave your executor with a lot of detective work to perform. Your Will, insurance policies, public and private share certificates, investment records, mortgages, legal and business agreements should be stored in a safe place with its location and a duplicate set of keys made accessible to the executor(s). And make a list of your key business and financial advisors, their names, telephone numbers and areas of responsibility. They can be key resources for your executor as he settles your affairs.

If you would like to learn more about Estate Planning be sure to attend Gary’s workshop on Thursday March 21, 2013. Email Gary at: This e-mail address is being protected from spambots. You need JavaScript enabled to view it or call: 1.866.603.7774 to attend or just to get more information on Estate Planning.

Gary VanMoerkerke is a Financial Advisor with Raymond James Ltd. The views of the author do not necessarily reflect those of Raymond James. This article is for information only. Securities offered Raymond James Ltd. Member-Canadian Investor Protection Fund. Insurance products and services offered through Raymond James Financial Planning Ltd., not member Canadian Investor Protection Fund.

Low interest rates bode well for the economy at large, but for income-oriented investors, they could be a problem. Retirees are finding it increasingly difficult to fund their retirement needs with traditionally “safe” investments such as GICs and T-bills or other low-risk investments simply because this income cannot keep up with inflation and taxes. Retirees need to find new ways to maximize their retirement income while keeping risk at a minimum. One solution worth considering is the insured annuity.

What is an Insured Annuity?

In a nutshell, an insured annuity is a combination of a prescribed life annuity (an annuity purchased with nonregistered assets) and a life insurance policy. The annuity provides lifetime income with the added benefit of preferential tax treatment. Prescribed annuities consists (in part) of a non-taxable return of your capital plus interest, where the total expected interest to be earned over the life of the entire contract is spread evenly over all payments. As a result, annuitants receive enhanced after-tax income compared to other fixed-income investments such as GICs.

The income generated from the annuity then pays for the other component of the insured annuity, the life insurance policy. The life insurance guarantees that your beneficiaries receive an amount equal to the original annuity investment. This means that you don’t have to worry about an annuity purchase eroding the size of your estate because your beneficiaries will receive the value of your estate through insurance proceeds.

Benefits of an Insured Annuity

Retirees choose insured annuities for four main reasons: a) they receive a greater after-tax income; b) an annuity may make the retiree eligible for increased government benefits; c) an annuity guarantees a lifetime income; d) an insured annuity leaves the retiree’s estate intact.

The income from insured annuities combine principal and interest payments, allowing annuitants to maximize their retirement income. This income is then spread equally over the life of the annuity, thus reducing taxes.

Because annuitants enjoy reduced taxable income, retirees may also increase their government benefits, such as Old Age Security, Age Tax Credits, etc.

Another feature retirees appreciate about insured annuities is that the annuity income can be eligible for the $2,000 pension income tax credit. Talk to your tax professional for details.

Who benefits from an Insured Annuity?

An insured annuity may not be the answer for everyone. Ideally, this fixed-income investment is suited for individuals or couples who:

• Are insurable and between the ages of 65 to 85
• Are dissatisfied with current low interest rates
• Want to minimize investment risk while maximizing after-tax retirement income
• Seek to maximize government benefits and lower taxes
• Desire a guaranteed income for life
• Want to leave a tax-free gift to their heirs.

Remember, an annuity is simply one solution to fulfill your estate planning needs. A Raymond James Estate Planning Advisor can work with you and your Investment Advisor to come up with a solution that meets your unique circumstances and future financial needs. If you have any questions feel free to contact me at 1.866.603.7774 or via email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .