Business succession plan: projected tax and estate outcomes

The situation

He came in with a number, not a question. The business was worth about $12 million, he had an investment portfolio beside it, the children were taking over inside three to five years, and the tax on the deemed disposition was roughly $4 million. He treated that as fixed. What he had not been told is that it was not fixed, it was growing, because there was no estate freeze and every dollar the business appreciated added to the bill. He also did not know that a private company's preferred shares can be given to a charity at all, and he cared about one in particular. No freeze, no charitable plan, no insurance, and on top of the capital gains his children would still have faced up to 53% tax pulling money out of the corporation.

What the advisor describes

• The estate freeze would freeze the shares at $12 million, at their current value.
• Donating frozen preferred shares to charity was projected to reduce the bill to about $350,000, a 91% drop.
• Corporate-owned insurance would replace the donated value and projected net estate value increased about $3 million.
• The share gift and the death benefit both credit the CDA, so money leaves the corp tax-free.

Where it left them

The case design projects about $350,000 in tax, compared with approximately $4 million without the plan. It also projects roughly $3 million more in net corporate asset estate value and a $5 million charitable donation. These are projections from the case design, not filed tax results or completed distributions.

Elise Keller

Stewart Fisher Financial

Canada · Preserve Wealth Group network