Business Owners: The Importance of an Estate Tax Plan

August 1, 2016

Many business owners fail to plan their estate or the succession of their business.

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Despite the economic importance of their business, most business owners do not know what the tax liability would be if both spouses were to die. An estate plan can ensure that settlement fees source from one or a combination of the following sources:

  • Life insurance, the business, from cash flow or liquid assets
  • RRSPs (also taxed when both spouses die)
  • Non-registered investments
  • Real estate properties or other assets that you may own

Consider taking the time to do some basic estate planning to determine who will take over the company, and from where your retirement income will come. Revise or complete both your will and power of attorney. Review your personal and corporate-owned life insurance, disability coverage, and key-person insurance.

In some cases, the payment of relatively small life insurance premiums can entirely solve the estate’s capital gains tax problems, or generate money to replace the tax that will be payable on your RRSPs when both spouses die. Insurance can also eliminate company debt and help a succeeding sibling, son or daughter with new business capital. Finally, it can help fairly equalize the division of your estate among all of your heirs.

 

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