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pension senario
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redbull81
Posted 2/6/2016 05:01 (#5091428)
Subject: pension senario


here is the situation, family member who is apart of our family farm is about to retire from their off farm job and after nearly 25 years of service has built up a rather large pension (1.8 million)
they can either leave the pension money where it is and receive 100k per year(approx 50% of his salary) for the rest of his life, upon his death 50% payment(50K) will be made to his beneficiary(his wife) for the rest of her life, with her passing the pension is gone.

my suggestion was to take half the money out of the pension and use it for a down payment to buy 20 quarters of land. (approx 200k per quarter in our area)
He then would have 50K a year from his remaining 900k left in the pension and the farm would pay him 62 k per year( match his 50 k he would have got if left in
pension plus 1000 per month) as well as assume the mortgage and land tax payments of the newly purchased land(the farm makes those payments)

another selling point to this i mentioned to him is as things stand the 2 of us will inherit the farm from our parents when the time comes.
i have no kids at this point and do not plan to have any, so i told him when i pass i will be leaving my 50% share of the farm to his 2 kids.
so where the pension gets cut in half with his passing and then completely disappears with his beneficiaries passing, the land will always be there and hopefully gaining in value(my belief is it will)

the reason for not suggesting he buy the land for himself and have the farm rent it off him is that current rental rates in our area(40-50 per acre) would leave
a revenue shortfall of approx 30k a year to cover the payment and taxes plus he would only be getting the 50k a year payment from his remaining pension and not the additional 62k offered to him from the farm.

He says he needs that 100k from his pension to maintain the lifestyle his family has been accustomed to, so any scenario presented that falls short is a
non starter in his mind.

we are in Canada so those tax implications apply.

thoughts or suggestions?


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