Following their return home, the Winchesters did what many people do after any type of tour or holiday. They posted a review on the travel site TripAdvisor.com.

Randy gave the experience three stars and wrote: “We did the Bigfoot Safari tour as part of a large group. The $10 price tag is about right for what we got. Basically a tour through some pretty rugged country on some pretty narrow roads. They promote the fact they have the largest herd of Highland cows in the Midwest. You spend about 5-10 minutes feeding them range cubes at the beginning of the tour, and see maybe 10 of the cows. Then it’s off into the hills you go with a guide telling some pretty fanciful tales along the way. All in all a decent experience but had we paid more than the $10 I would have been disappointed.”

“Randy w.” was credited with this posting on the site.

The Winchesters had no idea of the problems and stress this simple review would cause.

Darrell Henley, one of the principals of the theme park took exception to the review. By examining the participant list of attendees at the HHCA meeting he identified the Winchesters as posters of the review. According to court records: “Thereafter, Henley exchanged an unknown and disputed number of communications with Randy and Emily via telephone and email.”

Matters came to a head the next month when the Winchesters were sued in state court for libel, negligence, and tortious interference with business expectancy. A year of legal wrangling, suits and countersuits followed.

The case was eventually moved to United States District Court for the Western District of Missouri Southern Division and finally, on August 30, 2019, Chief Judge Beth Phillips found in summary judgment that the Winchesters did not defame the theme park.

While the Winchesters may have been absolved from defaming the theme park, it did not come without significant financial and personal costs.

Today, more and more people are sitting up and taking notice of what is being said about them on social media and the internet. And increasingly, they are taking action against anyone posting lies, making false statements, or even sharing disparaging remarks that might lead to a loss of their reputation or to business losses. The cost of being found guilty for defaming someone can be huge.

On January 31, 2018 the Ontario Court of Appeal upheld a lower court’s findings of $700,000 in damages against Saul Rabinowitz and Moishe Bergman. Until 2007 they were business partners with Ronald Rutman. The animosity over the business breakup escalated to the point that in December 2009, Rabinowitz began pseudonymously posting on Gigpark Inc. that Rutman was “a tax cheat, corrupt, a master of tax fraud, a thief and a crook” according to Lexpert, a Canadian legal publication.

At the appeals trial, Rabinowitz admitted to the court he was responsible and liable for the defamation. What he was appealing was the amount awarded in damages. Rabinowitz lost and he has now sought leave to appeal the damages to the Supreme Court of Canada.

There is no assurance the Supreme Court will hear the case. In April 2016 the Supreme Court declined to hear the appeal of the $1.1 million the B.C. Supreme Court awarded to Vancouverite Altaf Nazerali in finding he was defamed by Utah resident Patrick Byrne, CEO of the online retailer Overstock.com. Byrne publishes a website named Deep Capture which had portrayed Nazerali as an arms dealer, drug trafficker, al-Qaida financier and member of the Russian and Italian mafias. That defamation case took seven years to wind through the courts.

Defamation law in Canada

Gil Zvulony of Zvulony & Co. PC is a defamation lawyer in Toronto. He says cyber-libel is becoming more common. He warns: “What you write online can come back to bite you.”

Zvulony explains defamation is defined as untrue statements which lower the reputation of someone. If it is spoken it is slander. If it is written it is libel. If it is delivered online by email or a posting it is referred to as cyber-libel. There are three criteria necessary for a finding of defamation:

• The communication refers to a specific person/group/organization/business/product.
• The communication is intended to harm their reputation.
• The communication is delivered to a third party.

According to Zvulony, defamation is usually easy to prove. A defamed person does not have to prove damages. Contrary to most civic actions, the onus lies with the defendant to prove the statements he made are in fact truthful rather than for the plaintiff to prove damages.

Defamation awards are intended to compensate for loss of reputation, which is difficult to determine. As a result, defamation cases that end up in court are typically over the amount of damages. Therefore, Zvulony stresses: “If you can’t prove it, don’t say it.”

Zvulony then listed defenses that are used against a defamation claim:

• If the statements made are in fact true.
• If the statement is made only to the person it is about and not anyone else.
• Absolute privilege — statements made in court or parliament.
• Qualified privilege — statements made without intent to harm and for good reason (for example, providing an honest opinion about someone when asked as a reference).
• Fair comment — statements about matters of public interest that are honest statements of personal opinion and are based on fact.
• Responsible communication — this allows journalists to report statements and allegations made provided the news is of public importance and the journalist used reliable sources and tried to report both sides of the issue. Free speech is not a defense. Defamation laws do not limit free expression. You can still say what you want; you just have to pay if what you say is untrue and causes harm.

The fact the subject of your attack is a politician is not a defense. Politicians can sue for defamation just like anyone else. In 2019, Devin Nunes, the U.S. Representative for California’s 22nd congressional district filed defamation lawsuits against CNN for $435 million, against The McClatchy Company and Liz Mair for $150 million, and against Twitter, Mair, and the two parody twitter accounts Devin Nunes Cow and Devin Nunes’s Mom for $250 million.

Regardless if these defamation suits have real merit, or if they will eventually be thrown out by the courts, they are expensive and time consuming for the defendants.

Nor is anonymity a defense. It shocks me what people post on social media sites, especially if they are able to post anonymously. Growing up, if I had said the things that are now commonplace on social media, I would have had my mouth washed out with soap.

Demeaning statements and innuendo are pervasive throughout the internet, including on agriculture-related sites.

A case in point is a US$5 million award by a federal court in California to James K. Jordan, a 27-year employee of Wonderful Citrus, Kern County, California’s largest farming company, after his employer sent two emails to over 300 employees saying Jordan was going to be terminated and falsely accusing him of stealing from the company.

After the courts found the allegations against Jordan not to be true, and this was reported on Bakersfield.com, a poster using the handle LeroyJohonson still went ahead and publicly posted: “Jordan was not angel! Everyone who worked with him would say the same thing. If anyone takes the time to look into his, (sic) then they would see this as clear as day. Ask Jordan about his comments in the afternoon that he sworn he would never make again. Did he keep that promise? … NO.”

Are you really anonymous?

Most websites track user information on all postings. That information, if ordered by the courts in a defamation suit, must be provided to the internet service provider, who then can reveal the IP address of the computer and/or the subscriber information.

In January of this year, Ontario Superior Court, in a landmark decision, ruled in favour of Theralase Technologies Inc., a publicly traded pharmaceutical company, and its principals, in their defamation suit against anonymous internet posters.

A dozen posters have been fined thousands of dollars for posts they left on Bullboard forum in 2014 and 2015 accusing principals Roger Dumoulin-White and spouse, Kristina Hachey, of lying and illegal criminal behaviour.

Examples of posts presented in court include: “Roger is like a pest diseased dog spreading his filthy rabbies (sic),” the user Nastynasta wrote. “A mangy dog that won’t go away until he’s put down.”“The management team are liars!!!” TrueNorthStrong wrote. “Been lying for 21 years!!”

Posters were identified by their email addresses used to access the forum. Only one person so identified has come forward and the suit against him is ongoing at the time of writing. The other 11 individuals were found in default and each was ordered to pay between $7,500 and $35,000 to each plaintiff. Further, the judge ordered these defendants must pay $55,000 in legal costs, citing their failure to participate in the lawsuit.

In his judgment on January 13, Justice Frederick Myers wrote: “If people want to make hurtful statements about others and then try to hide from the responsibility to prove the truth or other justification for doing so, then as discussed by Goldstein J., their cowardice is reprehensible, and, in my view, they should bear costs on a substantial indemnity basis.”

There is no question that defamatory remarks harm reputations. False accusations can end marriages, cost jobs, even destroy small businesses.

A defamation suit may provide some economic remediation but personal reputation damage may never be repaired.

Have you been defamed?

Zvulony has posted a list of the “Top 10 Tips for Internet Defamation Victims.” It details steps which should be considered if you feel you have been defamed. He warns: “Starting a lawsuit is the last option … It is expensive, uncertain, and emotionally draining.”

Before suing for defamation, Zvulony says to act fast, get expert help, determine the parties, determine the scope of the defamation, preserve the evidence, consider ignoring it, consider a refutation, and consider burying it or issuing cease and desist. For a complete description of each of these actions check out this article at zvulony.ca.

More importantly, ask yourself, is your post intended to belittle, harm or attack someone’s reputation? Is it the truth, or just what you believe? You may think the meme is funny, but will the person you are attacking think so?

Ask yourself how you would feel if those words or pictures were posted about yourself or your mother. Would you be comfortable if what you posted appeared on the front page of a newspaper?

Says Zvulony: “Be careful with your words. Words are important.”

Guaranteed removals

Of course, today’s spike in defamation charges and awards also offers a business opportunity.

Unique in the world. Guaranteed Removals is a Burlington, Ont.-based business, started in 2016, to permanently delete online content. The Globe and Mail ranked the company as #55 in their 2019 list of Canada’s Top Growing Companies.

Guaranteed Removals’ website claims they can permanently delete online blogs, news articles, reviews and complaints, civil legal documents, government links, public forums and attack sites, unwanted pictures/videos and mugshots.

Guaranteed Removals provides a personalized quote for permanent removal of online content you want removed, and no payment is made until the removal of all such content has been completed.

If your business or personal life is being negatively impacted by online material, you may want to consider the services of a company like Guaranteed Removals to permanently remove material offensive to you.

Or if you have posted offensive material, hiring such a company to remove your defamatory posting may be a relatively inexpensive way of protecting yourself from a crippling lawsuit.

The post Watch what you say appeared first on Country Guide.

In multiple ways, it’s a giant leap from the tie-stall barn where, since the 1930s, the family has milked registered Holsteins.

This part of the story began last year when Murray McCorquodale took over full ownership of the farm from his 80-year-old uncle, Fred Innes, after they’d had a successful partnership for decades. As they were going through that process, the family jumped right into talking about transferring to the following generation.

Murray and his wife Cassie are sandwiched between the generations, with their children James, Sarah and Cate now each interested in farming. James has been home working full time for a year and half, while both Cate and Sarah have careers off the farm. Sarah is a teacher in northern Quebec but hopes to be closer to home soon, and Cate is a lawyer in Stratford and works at home on the weekends.

As of mid-January they were still milking in the tie-stall barn, the labour-intensive job of “swinging” cows, milking one group and then switching in the next batch because now they have too many cows for the stalls. In the spring, they started building the new pack barn and it’s big enough to double the milking herd (currently 55-61 cows) so they can eventually fully utilize two robotic milking units.

Building the barn has given them a collective goal and been a catalyst for learning how to make decisions together. Murray has been acting as general contractor, and all the family’s voices are being heard about the project. The “children” (all in their 20s and 30s) are adult peers now, and all their skills and education are contributing to the continued success of the farm.

“It’s taught us that not everyone thinks the same way or communicates the same way, and we all deal with stress differently,” says Cate McCorquodale.

Until the barn is completed, it’s difficult for them to discuss the future, as they’ll have an entirely new routine on the farm with new skills, labour and management required. They want to wait and see what the farm looks like logistically to see where everyone can fit in.

In the meantime, lawyer McCorq­uodale created simple but smart legal documents to transfer the assets from uncle to nephew and is starting to get her family to think about how they might organize the next transition of the farm business in the future.

“It takes time to get all the pieces in place,” she says. “It’s not just about transferring ownership, it’s about the process.”

McCorquodale says it doesn’t have to be complicated to be a good business structure. When they transferred her great uncle’s ownership she wrote simple, one or two page agreements — one to transfer the land, one for the quota, one for the cows, and one for the house, while he updated his will.

Innes knows he can stay living on the farm and maintain ownership of a few of his favourite cows. The cow agreement simply states that if the cows or their offspring sell, he gets the money from the sale and the farm pays to take care of them and gets the milk. These straightforward contracts with his nephew allows Innes to keep engaged in the business he has loved all his life while transfering the full responsibility and almost all of the ownership and management.

Discussions on how to transition to the younger generation naturally sprang out of the transfer of ownership between uncle and nephew. It brought their family together to discuss their future and the farm’s future, leading in turn to discussions about expansion, new technology and new facilities.

Looking to the future has become integrated into how the business operates. Importantly, it’s also integrated into how they think. For example, when each member of the younger generation said they didn’t want to be tied to the cows seven days a week with no vacation, but they all wanted to farm, a robotic milking system and working together became a good option. With some research, they decided to build a pack barn similar to the heifer barn they had built 15 years ago.

The family also considered setting up a corporation right away, but held off to see how the tax rules were going to change. Plus with McCorquodale and her sister’s sub­stantial off-farm income, they wanted to see how it might affect them income tax-wise. Eventually, with three potential farmers in the next generation, they will likely create a corporation, says McCorquodale, but for now, they are focused on finishing the barn.

Besides, there are a lot of things they need to discuss before they get tied into a legal ownership structure. For example, now they are all considered straight hourly-paid employees, but with the new barn, who will do what and how will they split ownership? How much each of them is going to need financially means sharing earnings information, not something that is usually done in families. How will they deal with future spouses? When will the older generation want to retire?

These can be difficult discussions but McCorquodale says they are starting to talk about them so they can think on it and proceed later after the dust settles from the construction pro­ject. They’re all optimistic about the future and about preserving the legacy of the farm.

John Mill, a tax lawyer based in Windsor, Ont., says the core issue that sometimes gets missed in succession planning is that a generational family farm is not a financial asset that is part of an investment portfolio. Instead, the generational family farm is personal, and it is a legacy in the same way as other personal mementoes with special family significance that are passed down through generations.

He calls succession-planning documents a family farm legacy agreement. “The first step is to develop a consensus that the generational family farm is worth preserving. This consensus must be the foundation of any planning. If there is dissent or lack of consensus about the family farm legacy, then careful consideration must be given to the planning,” says Mill.

An increasing problem with succession planning, he says, is defining fair market value (FMV) and trying to equalize estates. It’s how the family approaches the problem that will provide a good solution, and it’s not about maximizing inheritance. “The answer will never be found in legal documents or financial instruments alone,” says Mill.

Instead, he says, the answer lies in an alignment of two significant concepts: the generational family farm is a unique legacy deserving of protection, and the lifestyles of the members of the family farm and their families are deserving of protection. The legal documents then can be drawn to match those goals.

Legal documents

One of the things farm business transition planning does is to formalize processes, which also brings up the importance of having other legal documents in place.

Lawyer Laura McDougald-Williams says there are many important documents that are created along the journey of farm succession, depending on the stage of the succession process. McDougald-Williams and her husband, Dustin Williams, are former Outstanding Young Farmers and operate a grain farm near Souris, Man.

She says important documents can include marriage contracts, and employment contracts for family members/spouses as well as non-family hired help, partnership or operating agreements, corporations with unanimous shareholder agreements, land rental agreements, purchase/sale agreements, vendor take back mortgages and/or gift declarations, and up-to-date wills and powers of attorney.

For the young McCorquodales, the transition process has brought up the need for prenuptial and co-habitation agreements, as none of them are married yet. Through her legal network McCorquodale sees more divorces destroying more farms, and many more young people living together with no legal agreement between them in case they split up.

She prefers to call prenuptial agreements “marriage contracts” and says a co-habitation agreement can be written to automatically turn into a marriage contract agreement later. “It’s really not a black-and-white, win-or-lose situation; it’s about defining the grey areas,” she explains. “For a few hundred or a thousand dollars you can deal with it when everyone likes each other. Or you can deal with it at the end when everyone is angry and it’ll probably cost you much more.”

The other area of farm litigation McCorquodale is seeing more of has to do with estates. More litigation is happening with farms because the estates have become more valuable, she says. “It used to be the only person who wanted the family farm was the one left there. Now it’s a multi-million-dollar asset and the public has become more aware of the values lately. Also labour-wise, it has become easier to have a full professional career and farm too, so more people like me are interested.”

McCorquodale has been practising law for two and a half years and before that completed her master’s in cattle genetics and her undergraduate degree in animal science, both at the University of Guelph. It was when she was in law school that she realized how much she missed the farm work, particularly working with the animals. So she started working on the weekends and helping out when she could while going through law school in London, Ont. “I like the cows and have invested in my own cattle, my own genetics,” she says.

The first step

Creating strong, forward-thinking documents and structures can be a risk management tool for a farm but it is also involves thinking about estate planning. McCorquodale points out that 95 per cent of the farm agreements she drafts deal with estate planning. “You have to have it all (agreements) on paper now,” she says.

Families need to develop farm transition agreements reflecting their principles and values. “In the absence of courageous conversations, families will often revert to boiler-plate agreements that fulfil legal obligations but may not necessarily reflect the families’ values, nor their intentions,” agrees Jim Snyder, national director of agriculture practice development at BDO Canada. BDO offers a one-day workshop on “The Principles Behind Effective Agreements.”

Snyder wishes charter for corporations would not be issued unless accompanied by signed shareholders’ agreement and partnership and co-habitation agreements. The time to deal with an issue is before it becomes an issue, he says.

“When relationships have broken down, it becomes difficult, if not impossible, to negotiate agreements acceptable to all parties. Worse than that, we cannot construct an agreement with someone who is no longer here and/or no longer able to represent themselves.”

It’s important for farmers to have wills and powers of attorney completed, and ensure that their children, once they turn 18, should have them done as well, even if they don’t own much of anything yet. “Lots of young people think they don’t need a will, but they will buy something one day soon and if they have a will in place, they are prepared ahead for that day,” McCorquodale says. “There’s no lag or forgetting when things get busy.”

Also, many people forget to keep their wills updated, says McCorquodale. She has had situations where people think their wills are fine but then they get marry and don’t realize that the old will then becomes invalid.

Having a power of attorney allows someone to step in to keep a farm going in case of an operator or bill payer becoming incapacitated. This is becoming critical as banks become less local and less flexible in their management.

Another thing that McCorquodale sees being done incorrectly and causing problems is putting joint names on bank accountants or assets. Although it can be a very good idea, it has to match with the plans for the farm overall and everyone’s income tax situation, and it must be communicated to the whole family.

Joint tenancy considerations

With joint tenancy, there is a need to balance competing interests and risks, and to ensure that any joint ownership is consistent with cohabitation agreements, business ownership structures and estate plans, says McDougald-Williams.

“There are especially serious issues with the parent generation adding adult children onto title jointly to bank accounts or land,” she says. “Adding adult children on as a joint owner is generally discouraged, unless the intention is for them to inherit this asset, and this intention is clearly documented, preferably in the donor’s will.”

Williams adds that people need to be aware there’s no longer a presumption under the law that joint tenancy includes the right of survivorship to the surviving owner, unless they can clearly demonstrate an intention that the person creating the joint tenancy intends for it to include the right of survivorship. Otherwise, the surviving owner is deemed to be holding the asset in trust for the estate beneficiaries.

Another more common litigation situation McCorquodale has seen lately is when a family is in the middle of or hasn’t started succession planning and something happens to make it unravel: maybe someone gets angry or sick or even dies. And if at that point they don’t have a signed or funded unanimous shareholders’ agreement or other legal agreement on paper, there are no guidelines on how to proceed.

Or they made a succession plan many years ago and didn’t update it to adjust for changes in the farm or in the family. Farms are moving, rolling things, so the agreement has to continue to work, McCorquodale says.

A lack of communication causes problems for farm families such as documents being created and signed without the family telling their lawyers and accountants everything. Or the family doesn’t know. It’s not always easy to talk about these things, but you need to include the immediate farmers and their spouses and partners in the discussion, says McCorquodale.

On a farm you have the confounding problems of working all day together and then sitting down to dinner together and historical family dynamics. It’s easy to put off talking but understanding that succession planning is the transitional part of a business plan and knowing that it’s a collaborative continuum will help.

“You have to keep going and everyone needs to understand that it’s not always going to be easy or perfect and it’s okay,” McCorquodale says. ”But that can’t stop you from moving ahead.”

The post Legal insights into transition planning appeared first on Country Guide.

When the courts awarded a C$2.2 million settlement to Davies, the family was left broken, even though the settlement was later reduced to C$855,000. Davies was still evicted from her home on the farm, and the six-figure legal costs took a huge bite out of the farm and the family’s fortunes.

Does it happen in Canada?

Rarely do farm cases in Canada get such high-profile treatment in our national media, but that doesn’t mean that there aren’t plenty of such cases out there. Feed the search terms “constructive trust” and “farm” into the Canadian Legal Information Institute’s online database and almost 2,000 cases pop up.

And those are just the minority of cases that end up in court.

Probably 80 to 90 per cent of such cases settle out of court, says Don Good, an Ontario lawyer who has dealt with plenty of farm litigation cases over a career spanning more than 30 years.

Understandably, (if you have ever lived in a small, rural community), in most cases, when the parties settle, whether it’s in court or outside of court, they have a non-disclosure agreement in place so they don’t end up in the press or the public eye.

“I was never encouraged by my clients to say, ‘Well you know, farmers could learn from this, put it in the paper,’ because they really didn’t want that publicity,” says Good. “Usually, when it gets to the point of litigation, the family is pretty badly damaged. They’re terrible cases to have to handle, and nobody wants this to become public, especially in a small community.”

There are no winners except the lawyers when a dispute over the family farm leads to litigation.

“When I took these cases on, because I’m a farm boy myself, I always tried to make sure the client understood I was going to do the best I could for him or her as my client, but I would also try to do the least amount of damage to the family and the farm,” Good says. “If the client didn’t agree to that, often I didn’t take the case on. But there were times, when positions were so entrenched, that I thought this doesn’t make sense. There are no winners coming out of this, everybody’s going to lose.”

What is “constructive trust?”

Most of these farm legal cases involving a dispute over who is entitled to what are brought under the principle of constructive trust or unjust enrichment, which doesn’t just apply to farms, but is more common in a farm situation, especially when there are no wills, written business agreements or farm transition plans.

Constructive trust refers to a situation where somebody has contributed to the value of property and has not been compensated for it. As an example, a son works on the farm for many years with little compensation expecting that he will inherit the farm upon his parents’ death. That doesn’t happen either because the parents change the will to make someone else the beneficiary, or there is nothing at all in writing to say this was their intention, so others make a claim on the property after the parents’ death.

“In this instance, the son would sue for constructive trust because the work that he did was directly related to the value of the property involved,” says Good.

In some cases a person may provide a service that provides a benefit for which they are not paid, such as caring for a sick parent or relative. The principle behind “unjust enrichment” is that people shouldn’t take advantage of other people’s work and effort and not pay for it.

Constructive trust is also unjust enrichment, with the difference is that property or land is involved.

Litigation is costly

Many of the early farm family litigation cases involved common-law spouses, but one of the most common today is a child who works forever on the farm but then at the last minute, wills are changed or are found to be inadequate when other siblings come racing home to claim a share in the farm.

There is always a financial burden to bringing litigation, which can put additional stress on individuals and the farm business. Cases that go to court can quickly amass legal fees in excess of $200,000 to each party.

“When people settle out of court, at least the costs are usually blended across the parties,” says Good. “Courts pick winners and losers, so the loser really takes a hit.”

Unfortunately, non-farming siblings often have an overly romanticized view of the farm that leads them to demand their fair share without stopping to think what “fair” really means in terms of the farming sibling who is taking all the risks on a daily basis.

“Often what happens is the children who went out and made their fortune in life in the non-farm world still perceive of that farm as being idyllic and that their brother or sister was lucky to get the farm,” says Good. “They forget about BSE, and rain this year and drought the next, and the prices are bad, and all the things that farmers go through, the risks they take and the hazards they run up against. He got the farm in the first place, whereas we had to go work for a living. All they see is he or she is getting all that money.”

There is also rarely any consideration for the fact that the value of land and other farm assets, while they undeniably have increased, and continue to increase dramatically, is tied up as the equity needed for the farm to obtain financing and continue to operate.

Farmers know that it’s not just cash in the bank, but non-farm siblings often want to treat it that way.

Transition starts today

It’s unfortunate that more farm families don’t realize that transition starts with the living and encompasses what’s happening today. It’s key to avoiding conflicts that could harm the family farm, and the family itself down the road.

“Quite often, farm families, from a legal point of view, are operating in circumstances which are more complicated than they realize,” says Laura McDougald-Williams, who practices law in the small, rural community of Souris in western Manitoba. “In the first place, when there are siblings or parents and children farming together, they should have some sort of written document to clarify everyone’s intentions about the current situation that they are in. As an example, it’s common for children to trade labour in exchange for using their parents’ machinery as a way to get them started. Those types of arrangements can cause conflict if there is a misunderstanding at the end of the year about how the expenses and profits are shared.”

McDougald-Williams is also a farmer, and because she understands the risks of farming, she spends a lot of time trying to help her farm clients develop written agreements to preserve harmony in the farm operation over the long term. “It’s important that how land and farm assets are to be transferred is documented so that, in the event of a disability or a death, for example, it tells the whole story clearly for other family members, or a power of attorney or executor that has to step in,” she says.

The first time someone comes into the lawyer’s office to talk about succession planning, they often think they just need a will that sets out how they want to distribute their personal and/or farm assets upon their death.

But in almost all cases, the transition plan needs to be a lot clearer than a will that says simply “I divide my estate equally amongst all my three children.” That probably works if someone dies with a million dollars in the bank that the kids can split three ways. But when that one million dollars is tied up in farm land, machinery, buildings, homes and inventory, not to mention the addition of sweat equity in the case of farming children, it’s a lot more complex.

“Particularly in families that have non-farming children, the succession plan should make specific provision for an equitable, not necessarily equal distribution of assets among all the children, that allows the younger generation to continue farming without having to sell a half or third of the farm to satisfy testamentary instructions,” says McDougald-Williams.

Are you headed for court?

With the value of land and farm assets escalating, are we going to see more of these kinds of cases, or is that increase in value making more farm families aware that they need some sort of written agreement?

Good doesn’t think the message is getting through to the extent that it should. According to the 2016 Canadian Census of Agriculture, only 25 per cent of farms have written business plans and just eight per cent have a formal, written succession plan.

Accounting firm BDO Canada says three out of four farms will change hands over the next 10 years, and with 48 per cent of farms reporting that they have no chosen successor, the perfect storm appears to be brewing for many more legal battles over valuable farm assets.

“As long as that situation continues, I have no reason to believe that the number of cases will drop off,” says Good.

The average age of Canadian farmers is 55, which means we can expect a lot of farm assets to transfer over the next couple of decades. That opens up the potential for a huge amount of farm litigation if farmers don’t get the message that they need to plan for succession and get things written down.

“A farmer will save a thousand dollars by not getting his wills or any agreements done and that could cost him or his estate $200,000 plus when it isn’t done right,” says Good. “Many just don’t see the value of that first thousand dollars and what it could save, not just in money but in family disputes. We’ve got to get farmers to believe that that initial investment is worth so much more to them, and certainly worth an awful lot to the next generation.”

The value of mediation

Things have to be pretty bad before farm families end up in court because in most provinces, the court process usually involves both a mediation and pre-trial step to find a way to settle the case.

Farmers can also reduce the risk of court action by understanding the drivers that can make legal action more likely, and by trying to reduce the possibility that the farm will head in that direction.

When it comes right down to it, legal niceties aren’t the only issues to be on the alert for.

Both Good and McDougald-Williams encourage farm clients working on a transition plan to seek the advice of a good farm family coach early in the process, because it’s often the emotion and family dynamics that are the stumbling blocks to a good, workable plan.

“I think the key is a family coach who helps the family organize a plan. If you go to the experts first, nine times out of 10 tax considerations drive the process, and that’s often a poor driver because it doesn’t take into account the mental element and the family dynamics,” says Good. “But a family coach can concentrate on those family dynamics, particularly if there are any conflicts.”

It’s likely that families already know what those conflicts are or will be, long before they get into decisions about transitioning the farm, and in some cases, it’s actually a reason why they don’t want to do it, because they fear having to face up to what can be long-standing family issues.

But a do-nothing strategy instead of trying to reconcile those issues and moving on to develop a plan that works for everyone is just setting up the surviving members of that family for tough times ahead.

“Most often we hear the biggest barrier to farm transition planning is fear — fear of conflict, fear of life after transition for the current farm owners or managers, fear of ‘opening up a Pandora’s box,’ as we recently heard from one farmer,” says Heather Watson, executive director of Farm Management Canada.

Transition can happen faster than expected

Besides evolving roles and responsibilities, farms can face sudden, unexpected change such as a death or disability that accelerates or forces the transition process, but which many transition plans don’t even consider. These events in themselves put tremendous stress on the family and the farm operation.

Advanced planning can help prevent additional stress by taking care of key operational issues ahead of time.

One of the common issues that farms face in these situations starts at the bank. If the farm account has only one partner’s name on it, and that person dies or is unable to sign, the bank will often freeze that bank account until new arrangements can be put in place. Meanwhile, the bills still have to be paid and some kind of cash flow maintained, which can be stressful and costly.

“I always encourage farm clients to have two signing authorities on the farm account as well as that joint account and to also have their own account with their own name on it, because I have had situations where joint accounts got frozen until one partner’s name was formally removed and a new account opened,” says McDougald-Williams. “It was useful for the surviving spouse to have an account in his or her own name for depositing life insurance cheques or whatever to keep the family afloat.”

Another common challenge has to do with estate administration costs, such as probate tax, which can mount up. As an example, if a farmer passes away and has farmland worth $1 million with only the one name on the title, the spouse has to pay $7,000 probate tax to have their name added to the title, and the lawyer fee would be $10,000 or $13,000 on a million-dollar-valued estate if they follow the government prescribed tariff.

If both partners names are on the title, these costs are avoided, but there are sometimes good reasons why that doesn’t happen.

“It’s often a question of balancing a variety of competing risks,” says McDougald-Williams. “A reason that people often don’t add their partners on the title is the fear of a family separation and the effect that would have on the farm.

The next generation will drive change

If you do choose to add a spouse to a title, that is deemed to be an irreversible gift of 50 per cent of that land, whereas if there was a divorce and the person was not on the title, they wouldn’t necessarily be entitled to half of the value.

Of course, there are spousal or cohabitation agreements which can be drawn up that ensure someone marrying into the family has no claim to the farm’s assets, but that can be a thorny issue in itself. The key point illustrated by such issues is that transition and estate planning is an ongoing process that changes as people go through different stages of their lives. “Every estate plan is unique and you really need to sit down and plan it all out, and take into consideration all these unique circumstances,” says McDougald-Williams.

The next generation will be the drivers to get written succession plans in place, and many will learn from their own experiences that they need to begin the process early.

“Young people are the key, because you should plan to transition the property when you’re 60 or 70 back when you’re in your 20s and 30s because there are tools you can use, like life insurance,” says Good. “There can often be a huge capital gains issue, or farming siblings may have to pay out non-farming siblings. One of the ways that can be done, without having to sell off part of the farm itself, is for Mom and Dad take out life insurance at an early age, when it’s still affordable, to cover those future costs to the non-farming children.”

If the aim is to keep the farm and family intact, it seems achieving open, honest communication is the first, vital step, so when it’s time to bring in the trusted professionals to figure out the legal and financial aspects, everyone is on the same page.

“I can tell people what happens if they don’t do it right,” says Good. “I can tell them about the cases where families spent $200,000 on me when they could have spent $2,000 on getting it done right in the first place. I can relate some of the dark side of this whole process if people decide they want to be hard-nosed about it.”

This article originally appeared on AGCanada.com.

The post Courting disaster appeared first on Country Guide.

However, in a recent decision, the Court of Appeal for Ontario has made clear that passive involvement as a trustee does not meet legal muster. Each estate trustee must take an active role in exercising his or her judgment and discretion on every matter relating to the administration of the estate.

If a problem arises, a trustee will not be exonerated for passively acquiescing in a co-trustee’s decisions or actions.

The case arose from a will in which the testator, Thomas Cahill, appointed his daughter, Sheila, and his son, Kevin, as executors and trustees of his estate. They were directed to set aside $100,000 in a trust fund for the benefit of their brother, Patrick. The will specified that Kevin would be the trustee of Patrick’s trust fund with “sole discretion as to the investment of the monies” in the fund. Patrick was to receive a payment of $500 each month from the trust fund.

After Thomas died in 2010, Sheila and Kevin arranged for his house to be sold, with net proceeds to the estate of $223,013.75. Sheila and Kevin both signed a direction to the estate’s bank to issue a draft for $100,000 from the estate’s account, payable to London Life, with which Kevin opened an investment account. On the application form, Kevin described himself as the annuitant and Sheila as the contingent policy holder. Kevin did not mention a trust for the benefit of Patrick. He included the account information for Michael, another brother, under the heading “Information for Pre-Authorized Payment Agreement/Direct Deposit.”

In the years that followed, either Kevin or Michael would withdraw funds from the investment account and make the required $500 monthly payments to Patrick. This continued until the spring of 2014, when three consecutive monthly cheques were returned for insufficient funds. After this, the brothers made no further payments to Patrick.

Patrick later discovered that Kevin had borrowed the remaining money in the London Life plan as a “mortgage” for his business premises. When the business failed and the bank realized on the premises, there were no funds left to pay Patrick. Patrick then brought an application for payment of his entitlement under the will. He also sought to remove Sheila and Kevin as executors and trustees of the estate, and Kevin as trustee of his trust fund.

During the course of the litigation, Sheila’s lawyer wrote the following to Patrick: “Neither Sheila nor her children received the money from the house sale, Kevin did. I do not know what he did with that money. But one thing for sure is that Sheila and her two children do not know either. They are not liable to you in any way.”

The Court disagreed. It found that Sheila was negligent because she had abdicated her duties as executor and trustee of the estate. She was required to take “real, active steps to ensure that the trust fund was set up in accordance with the Will,” but she failed to do so. The Court stated: If the Deceased had merely wished Kevin alone to have absolute authority and to make all decisions with respect to the Estate, he would not have appointed Sheila as an executor and trustee. Sheila’s appointment in that role must be seen as reflective of the Deceased’s wish that she not simply acquiesce to or rubber stamp anything suggested or done by Kevin. Sheila was obligated to exercise her own judgment. She completely failed in that duty.

The Court held both Sheila and Kevin responsible for the outstanding principal necessary to fund the monthly $500 payments to Patrick.

Sheila appealed. The Court of Appeal dismissed the appeal. It confirmed that each trustee must take an active role in exercising their judgment and discretion on every matter relating to the estate. Sheila’s passivity did not protect her. As the Court put it, “doing nothing was not a luxury available to her as a co-trustee.”

This case is a good example of the common law obligations and duties that apply to trustees in all provinces. It has long been recognized, including by the Supreme Court of Canada, that the standard of care and diligence required of a trustee in administering a trust is that of a person of ordinary prudence managing his or her own affairs.

Co-trustees must recognize and understand that they are obliged to take an active role in fulfilling their duties as trustee. They cannot sit idly by as their co-trustee manages the estate. If they cannot or do not wish to participate in the administration of the estate, then they should renounce their appointment. Otherwise, they may be exposed to liability when something goes wrong. As Donovan W.M. Waters, a leading trusts scholar once wrote: “[A trustee] is not entitled to shrug off the wrongful actions of a co-trustee on the basis that he knew nothing of what the other was doing.”

Nadia Campion and Sarah Walker are business and estate litigators at Polley Faith LLP. Their clients include small- to medium-size businesses, individuals and associations across a wide range of sectors, including in the farming community. They can be reached at 416-365-0550 or ncampion@polleyfaith.com / swalker@polleyfaith.com.

The post A co-trustee’s responsibility appeared first on Country Guide.

Farms and divorce can be a toxic mixture. Tradition, culture, religion, isolation, community gossip, strong families — they all come together to add to the stress, which then gets top loaded with big assets.

Two Statistics Canada numbers are especially disturbing. First, 41 per cent of marriages fail. Second, couples most often get divorced in their 40s.

They’re disturbing because for farmers, that’s also the point in their careers when their assets are starting to solidify, grow and gather steam… much of it thanks to the multiple generations of sweat, blood and brains that the family has injected into the home operation.

That means it’s even more important to discuss how assets, liabilities and growth will be divided among all the parties if something goes wrong, especially as farm sizes increase and new family members become a part of the businesses, either directly or indirectly.

On many farms, succession naturally leads to discussion about the four Ds, death, disability, disagreement and divorce.

Even if you’re not doing succession planning, however, creating a pathway for your business in case of divorce should be done before problems arise, and it should be guided not only by your caring and deeply held family values, but also by good legal and accounting advice. In this area, always insist on advice from a trusted lawyer, someone who will consider all implications.

In the eyes of the law, after all, marriage is essentially a legal contract dealing with the property rights of two people. Divorce is a termination of that contract. For farmers, however, that property can be worth millions, and its emotional value is at least that great.

Keep in mind, too, that the specifics of separation law vary from province to province, and the laws are complicated. And of course, each case is unique. But the overall legal framework governing divorce in Canada is based on the belief that value created or property acquired during the relationship should be equally shared on separation.

But farming has its own complexities, says John Mill, succession expert and tax lawyer based at Windsor, Ont.

To begin with, all parties should understand that in law, the term property means everything that can be transferred, and that in a farm context, this can involve things as complicated as shares of a family farm corporation or quota, or land, inventory (think crop in ground), equipment or homes, whether in your own name or part of your farm corporation.

Then there are other layers of legal complexity. For example, in Ontario any money received (or that you have a right to get eventually) as a result of a personal injury, like a car accident or money that you received from an insurance company because someone died, isn’t included as property, so it’s important that you be open and candid with your lawyer.

But this isn’t the fundamental farm concern. “In a family farm we’re trying to protect the family aspect of the farm itself,” Mill says.

In fact, on the farm, you may want a specific agreement to acknowledge that the family intends to keep the farm in the family for generations.

The conversation can start by everybody knowing the value of the property the spouses own on the date they get married. Then everyone also needs to understand that this foundation isn’t part of the property that would be shared if the marriage doesn’t succeed.

Today, most divorces are settled by negotiation between the two parties; they tend not to be settled by a judge.

Farmers need to know up front that while this has advantages, it also has risks. Too often when marriages break down, negative emotions carry the day and former spouses are intent on trying to gouge each other, or people just want out so badly they walk away without their fair share.

Both can be avoided with some smart, caring preplanning.

That begins by learning how to talk with a positive attitude to ensure fairness to spouses and to ultimately take care of their children in a splitup. Don’t let your default position be to hide behind the righteous­ness of keeping the family farm no matter what. Conversely, don’t sign anything that might compromise your ability to survive financially if the marriage does end.

Being realistic is being loving. “Marriage breakdown is always a possibility,” says Barrie Broughton of Lethbridge, who practises tax, corporate and estate-planning law in the heart of the capital-intensive irrigated farming area of Alberta.

Broughton says the law will not allow a person’s legitimate interests to be ignored, so the goal is to look at ways to accommodate those interests without causing the farm to be split up, or imposing an unsustainable financial burden. “We have a surprising number of marriage breakdowns that are handled quietly and in a respectful manner, maintaining a large degree of family harmony,” says Broughton.

The following may mitigate the damage a divorce could do to your farm. Although not totally comprehensive or applicable to all cases, this list is a starting point to launch your planning and thinking process.

Matrimonial home

The family home is an exception to rule that the growth in property value will be equally split. The full value of the family home must be shared equally, even if one person owned the home before they got married, received it as a gift, or inherited it.

This matrimonial home may include the land it’s sitting on even though only a small part of the residence was sometimes used for the business’s office.

If the farm property has been purchased with inherited funds and kept separate from family members, however, it might not be considered part of the matrimonial home. Find out up front, and be aware of the potential implications.

Another complication is that when money is put into the family home, it must be shared. So the value of renovations is shared even if that money came from a gift, an inheritance or other property that otherwise wouldn’t have to be shared.

To date, the rules for the matrimonial home do not apply to common-law spouses. A common-law spouse does not automatically have the right to stay in the family home if it’s not in his or her name. Also, if one common-law spouse owns the home they can sell or mortgage it without the other spouse’s permission.

Co-hab agreement

People often think they need a cohabitation agreement when they move in with someone in a romantic relationship, but the labelling around this often gets fuzzy. Remember, living together for many years, having children together, or referring to each other as “husband,” “wife,” or “spouse” do not make two people legally married to each other.

It can be hard to get everyone to see the benefits of preplanning for something negative, i.e. for splitting up. However, a cohabitation agreement can certainly clarify roles and expectations around the relationship and the home and farm.

Statistically, cohabitating is less stable than marriage. In past, the matrimonial property act didn’t apply, but the rules, definitions and precedents about cohabitating have been changing.

Ask your lawyer what living together on your farm might mean in your specific situation. For example, if that person is going to work on the farm, should they be paid and should their pay be documented?

You also should check with your accountant if you’re going to move in together, since you’ll be considered common-law for taxes after a certain period of time, depending on where you live.

Prenuptial agreements

Prenuptial agreements are basically a way of negotiating a divorce settlement ahead of time, before you even get married. Each party must have their own independent lawyer and many of those lawyers tend to tell the person marrying the farmer to not sign the contract.

Basically a prenup agreement lists the assets each party brings into the marriage with an agreed value, and an agreement that if the asset increases in value, then the increase will be divisible providing the marriage lasts a specified number of years. A prenuptial agreement can be modified if both partners agree, even after they marry, or you can write one while married, called a postnuptial.

If you don’t want to have to sell off a particular parcel of land to pay out the other spouse in case of a divorce, then an agreement might be of benefit. When individuals with large interests in separate assets are planning to marry, prenuptial agreements can help achieve clarity and trust, which helps dispel suspicion. On the other hand, however, the discussions can sometimes be very hurtful and add stress to new family relationships.

If the family farm corporation owns the home, or if it is on a large property or the property has a barn or shed on it, it can potentially be really problematic.

One way to make it seem a little fairer is to value the matrimonial farmhouse, like a house in town, on the list of assets and to have cash settlements for the spouse written right in the agreement.

These agreements can help reduce the impact of divorce, but if not handled properly, they can also cause more problems. “The term prenup has too much baggage: images of the gold digger versus the controlling patriarch. A better name would be Family Farm Legacy Agreement,” says Mill.

Inherit property

Michael Bondy, a chartered accountant in London and national director of succession planning with Collins Barrow, often recommends against transferring farms or farm shares to a child until after marriage, and then for the parents to gift the assets and do a gift agreement to exclude the assets and the income from them from those that qualify as marital assets.

“This and other reorganizations and structures may remove the need for a prenup,” says Bondy.

Before you get married, also ask your lawyer to explain the rules around inheritance. Under family law, if the property was transferred as a gift or an inheritance during marriage, it’s often excluded from being divided. However, you have to be able to prove it.

This can get a little messier with property held in joint names, even if it was inherited, so farmers again should seek legal advice before transferring property.

To protect the farmland from divorce, instead of building a house for your child on an existing farm parcel, a “gift” might be better protected via a subdivided acreage with an agreed value as of the date of the gift. Alternatively, you might consider formally lending the funds to buy land and letting the couple buy their own home so everything is written down.

Gift shares

Similarly, a strategy that veteran farm accountant Mike Bossy, president of BNG in Tillsonburg, Ont., has used to potentially avoid spousal ownership problems is to issue common (growth) shares to the parents, with these then gifted to their farming son or daughter as “excluded property.” This excluded property does not come under the definition of net family property in a divorce because it was gift from parents.

If that farming child dies at an early age, he or she can bequeath those shares back to their parents. All of this happens tax free in Ontario, says Bossy.

Although this method avoids the daughter-in-law getting the farm assets, it doesn’t consider her contribution or her future needs. With this plan, you might want to include an insurance policy listing the spouse as the benefactor, says Bossy.

Farm financial adviser and succession specialist Len Davies also favours the use of gift shares.

“The gifting of common shares after marriage is always my first choice,” says the Ontario-based Davies. But the overall agreement still needs to be fair if there is to be an amicable divorce. “The gift after marriage protects property,” Davies explains, “but what stops the departing spouse from claiming their ex is actually making $150,000 per year when they may not be?”

Davies also always recommends an agreement regardless, emphasizing fairness while protecting the farm.

Trusts

A trust can be one of the strongest ways to protect the farm assets from getting caught up in a divorce. Parents put a farm’s common shares in a trust for their son or daughter, making them the beneficiary of that trust. However, the “child” doesn’t officially own the shares, so they don’t have to give half to their spouses, even if they get divorced.

Generally, trusts are deemed to dispose of certain properties at fair market value 21 years after the day the trust was created, however. Also, they can be costly to maintain.

Unanimous shareholder agreements

Many farms use a corporate structure. In addition to the other reasons to use a corporation, the unanimous shareholders’ agreement can be used for a layer of protection for the farm in the event of a marriage breakdown or other unexpected developments. “With a well-crafted shareholders’ agreement, divorce doesn’t necessarily have to financially cripple the farm business,” says Broughton.

For example, the shareholders’ agreement (SHA) can stipulate that on leaving, a shareholder must give one year’s notice, with payment over 10 years at zero interest.

Also, if the divorcing parents share the goal of preserving the asset for the children, agreements can be written so the departing spouse gets or retains shares, with the shares ultimately ending up with the children of the marriage. The SHA can ensure the decision control remains with the farming spouse. Keep in mind that shareholders can only vote for directors and dividends, and to succeed in such a vote requires a majority. As long as majority control remains with the farm family, it may not matter if the former spouse owns some shares.

Sometimes, departing spouses need the security of a steady cash income, and retaining shares instead of receiving a cash buyout can be better for them. In those cases, the separated and divorced spouses are quite content to remain as a shareholder and receive the dividend income.

“In some cases we have spent generations creating a viable farm, and a Unanimous Shareholders’ Agreement is one of the tools we use to insulate the farm from adverse events,” says Broughton.

The post Common-sense thoughts on divorce appeared first on Country Guide.