Over the course of the last decade, the prevalence of estate litigation—which broadly includes disputes over Wills, inheritances, missing money and the like—has risen sharply.
This uptick in estate litigation can be attributed to the fact that we are in the midst of the largest transfer of wealth in human history.[1] Many trillions of dollars in assets have started to pass from the baby boomer generation to succeeding generations. This massive wealth transfer is fueling major estate battles. From a financial perspective, receiving a large inheritance can be a life-changing event for much of our population. An inheritance can mean an early retirement, paying off a mortgage, or purchasing your dream home. Given the significant impact that receiving an inheritance may have on one’s life, people tend to fight tooth and nail to protect or secure an inheritance.
In Ontario, the multi-generational farm family is no stranger to estate disputes. This should come as no surprise given that many family farms are comprised of large, valuable parcels of farmland that have been passed down through generations. Even when encumbered, farmland can be tremendously valuable. When the owner of farmland dies, the value of their estate can be worth millions of dollars.
This blog post highlights why family farm operations are uniquely susceptible to estate battles.
First, most farmers have children. Some have a few. Some have many. These children are raised on the family farm. They assist with farming chores before school, after school, on weekends, on holidays, and throughout the summer break, usually without remuneration. Some of the children might stay on the farm into their adulthood and earn a livelihood on the family farm, while other children might leave the farm to pursue their own careers.
Those children who stay on the farm into their adulthood develop a strong connection to the family farm. Quite often, those children who remain on the farm regard the farm as their own based on the concept of sweat equity (i.e., I live here, I work here for free or for very little and have done so for many years, therefore I am a part owner of this property).
Upon the death of a parent on a family farm, a child who stayed on the family farm to assist their aging parents with the farming operation will have a sense of entitlement with respect to the assets comprising the farm operation. The child who stayed has invested time, and perhaps even their own money into the operation without securing the possibility of repayment for their physical and monetary contributions. A child who stays on the family farm into their adulthood may strongly object to their sibling (who left the farm) receiving any interest in their late parent’s estate. This very scenario is a major source of estate disputes in agricultural families.
Another reason farm families are susceptible to estate battles is the nature of the assets comprising the estate. While dairy quota, livestock, equipment and structures on the farm all have value, the most valuable asset in the estate of a multi-generational farmer is always the land. Partitioning/severing farmland into smaller parcels so that all the beneficiaries receive a piece of the land is sometimes achievable, but doing so is an expensive, complicated, and lengthy process.
When there are numerous beneficiaries—typically the children of the deceased farmer—each beneficiary will have competing interests when it comes to farmland. Some of the beneficiaries may want to retain ownership of the land with a view to keeping it in the family for generations to come, whereas other beneficiaries will want to see the property sold for top dollar to maximize their inheritance and to ensure their financial stability for years to come.
While an obvious solution to this issue might entail one or more siblings purchasing the other sibling’s interest in the land, the asking price is always too high. This is because the sibling who does not want to retain ownership will consider the amount that their siblings are willing to pay for their interest in the land compared to the amount of money that the land would fetch if it were sold on the open market. If the sibling who does not want to retain ownership has a goal of maximizing their inheritance, a sale on the open market is the obvious choice.
These sorts of disputes—about whether to sell or retain the land—are often emotionally fueled and have the propensity to tear families apart (and often do). However, when these disputes are brought down to brass tacks and wind up in court, they are easily disposed of. If there is ever a dispute about whether a parcel of farmland should be sold or retained, and absent an extraordinary circumstance, the court will inevitably order that the land be sold.
Leaving aside the items outlined above, the most common reason why farm families are susceptible to estate disputes is inadequate (and sometimes even non-existent) succession planning. Perhaps the lack of planning is due to some sort of aversion to lawyers, accountants, and/or succession planning specialist. Perhaps it is ignorance to the sorts of battles that might ensue if a proper estate plan is not made and implemented. Or perhaps it is a product of procrastination. Whatever the reason, most family farm disputes can be circumvented with proper, careful succession planning.
Failure to make a proper succession plan on the family farm can have tragic results. This is especially so for an adult child who remained on the family farm to assist with the farm operation in reliance on a promise that they would receive an ownership interest in the land upon the death of their parent. Consider the following scenario as an example:
- A husband and wife reside on a 100-acre farm. The husband inherited this farm from his father.
- The farming operation has a small operating loan secured against the farmland but is otherwise not encumbered. There is significant equity in the land.
- Over the course of a decade, this farming couple have 6 children together.
- The husband and wife raise their children on the family farm. Part of the children’s daily lives entail performing chores around the farm before and after school, on weekends, on holidays and throughout the summer.
- As time passes and the children grow older, one by one the children begin to leave the family farm to pursue their own livelihoods and careers, until there is only one adult child left residing on the farm assisting with the farming operation.
- At the request of his parents, this adult child remains on the family farm.
- This child is promised that he will inherit the farm upon the death of the parents if he remains on the farm and continues to support the farming operation.
- In reliance on this promise, this child does not pursue post-secondary education, he accepts a weekly wage that is less than the minimum, and he works 14-hour days for the next 20 years.
- This adult child builds a house on the family farm property, becomes married, moves his wife into the home, and has children of his own.
- Before the parents update their Wills to reflect their plans to gift the farm to their child, they both unexpectedly take ill and shortly thereafter, die.
- Upon the parents’ death, the children of the deceased parents return to the farm, demanding that it be sold on the open market, together with the home the son built, so that the sale proceeds may be divided up in accordance with the Will.
- The child who grew up on the family farm, who built his home on the family farm, and who remained on the farm based on assurances that he would receive the farm is left in the lurch with two options: take what he is entitled to receive under the Will or fight for what he was promised by his late parents.
The scenario outlined above is representative of the facts of many estate disputes that arise within farm families. In the scenario outlined above, surely it was not the deceased parents’ intention for their child who stayed on the farm to find himself in such a dilemma. Although the child who remained on the family farm has legal recourse to address the injustice through various claims in equity, the reality is that the child will be spending tens of thousands of dollars in legal fees—money that he may not have—to secure the result that could have been achieved if his parents had a proper estate plan.
Caselaw is replete with examples that largely mirror the facts outlined above. The facts outlined above may draw sympathy to the child who remained on the farm. However, there are numerous real-life examples of children asserting claims against their late parents’ estates/farms when it was never the parents’ intention to benefit the disgruntled child to the extent the child believes he or she should be benefiting.
The unique aspect of these family farm disputes is that these disputes sometimes arise before the death of a farming matriarch or patriarch. This occurs when there is a breakdown of a relationship between the parents and the adult child working and living on the farm. The child might claim a proprietary interest in the farming operation and take his parents to court. My office was recently involved in a matter before the Court of Appeal for Ontario where this exact scenario happened. Although my office was successful on the appeal by defeating the son’s claims, doing so was not without our clients enduring several years of litigation and many thousands of dollars in legal fees.
Family farm disputes can become even more complex when partnerships are formed between the parents and a child, corporations are created, and joint operating loans are taken out.
All the issues outlined above can be avoided, or at least mitigated, with proper succession planning advice. This often entails the use of lawyers, accountants, and succession planning specialists to properly advise and guide a farming family through the succession planning process. All too often, owners of family farm operations do not seek proper advice, and all too often the obvious signs of an imminent dispute are ignored without any remedial steps being taken to prevent the issue from spiraling out of control.
If you or someone you know is embroiled in an estate dispute in respect of a family farm, or it is clear that a dispute is on the near horizon, contact Siskinds’ estate litigation team to discuss your options. We would be pleased to assist.
[1] The New York Times, “The Greatest Wealth Transfer in History Is Here, With Familiar (Rich) Winners,” updated May 23, 2023.