Why is an estate plan important for retiring business owners

When a business represents the major component of an estate, planning is vital. Entrepreneurs may think about retirement planning, yet not all business owners implement plans to allow them sufficient freedom to follow their leisure dreams. If you ask the owner of a successful small business if he or she plans to retire, you may hear, “I will never retire because I love what I do”, or “I will retire in 10 years or so.”

Why is this risky planning? Those who feel they never want to retire may not have developed retirement investment interests outside of the company aside from RRSPs. However, most believe their company will provide investment capital when sold, or, if passed on to the next generation, a salary or dividend payments.

Are all your eggs in one basket? Therefore, for some, their personal financial stability is riding on the future success of the company. When a business represents the major value of an estate, planning becomes necessary. Yet, many are not convinced that they need to plan their estate or the succession of their business.


Estate Planning is vital to Succession Planning. Despite the financial 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 these taxes will be paid 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.

Consider the following:

  • Take the time to do some basic estate planning to determine who will take over the company, and where your retirement income will come from. Revise or complete both your will and power of attorney. Review your personal and/or corporate-owned life insurance, disability coverage, critical illness insurance, long-term care insurance and key-person insurance.
  • Many business owners carry life insurance but miss a very important coverage related to health. Disability insurance and/or critical illness insurance can pay off a buy-sell agreement and provide income.
  • In some cases, the payment of relatively small life insurance premiums can entirely solve the estate’s future capital gains tax problems, or generate capital to replace the tax that will be payable on your RRSPs when both spouses die.
  • Life insurance can also eliminate company debt and help a succeeding son or daughter with new business capital. Finally, it can help fairly equalize the division of your estate among all of your heirs.

8 Amazing Advantages of Mutual Funds

Mutual funds offer investors a superior means of accumulating wealth through a broad range of investment solutions based on professional investment principles in a regulated environment.

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There are eight benefits of Mutual Funds which the investor appreciates:

  1. Professional portfolio management
  2. Manage risk through diversification
  3. Opportunities for foreign and domestic investment
  4. Oversight by professional managers
  5. Low entry investment amount
  6. Solutions meet a wide range of needs
  7. Easy to buy and sell
  8. Convenient administration

The rapid growth in investor confidence in using mutual funds escalated to over half a trillion dollars. This indicates the validity of using mutual funds in an investment portfolio.

Source IFIC

What special powers do executors have?

Before naming or agreeing to act as an executor, be sure to consider what is involved. Naming co-executors, one of whom is a professional in the field, can be a wise decision.

• An executor carries out the instructions in your will. Co-executors can share the task.

• Provincial laws define what the executor must do, whether they are a friend, relative, professional, or a trust company—however, the will can specify even more extensive powers.

• The executor may have to deal with some or all of the following at an emotional time: funeral homes, beneficiaries, Canada Revenue Agency (CRA), insurance and investment companies, government and business pension departments, real estate agents, lawyers, accountants, appraisers, stock brokers, and business partners.

• They can be empowered to convert the estate to cash or divide assets equally among beneficiaries. They can also make payments to the parent/guardian of a beneficiary under the age of 18.

Where there is life insurance with beneficiaries assigned, monies must be directed as defined in the life insurance contract.

•The executor (especially if inexperienced in legal or financial matters) should know how complex the estate is before agreeing to the task. If necessary, appoint a co-executor who is a professional in this field.

• Have a clear, objective idea of what will be involved before asking someone to be your executor and before agreeing to act as one.

What are the key reasons to review your Will?

Keeping your Will up-to-date is just as important as having a Will. Consider updating your Will for the following reasons.

• Marriage. You recently married, or a marriage ended since you made out a reciprocal (joint) Will. Your Will may be revoked upon marriage, unless it specifically states it was created in contemplation of marriage.

• A change of executor, lawyer, accountant, or guardian. If one of these key players die, or becomes incapacitated, or is replaced regarding your estate plan.

• You want to establish planned giving. You desire to leave monies, for example, to a charity, an art gallery, a religious organization, or a school.

• Birth of children and grandchildren. You want to ensure that they are provided for, perhaps through life insurance.

• Divorce. If your Will has previously named a ex-spouse as executor, this appointment is nullified upon divorce.

• Separation. If you die before a divorce becomes final, your spouse may retain access to your estate assets.

• Change in wealth. If you inherit money, or inherit life insurance proceeds, or your assets decline, consider altering your bequests.

• Special care is needed. A spouse, parent, or child has become disabled and needs future care.

• Change in health. If you anticipate requiring costly long-term health care, you may want to alter the specific bequests in your Will to reflect this new reality.

• Death of executor or beneficiary. Appoint a new executor or revoke a previous beneficiary directive or review your beneficiary designations.

• Sale of business. If your assets become more liquid upon the sale of a business, you may want to pass that benefit along to beneficiaries or charities. If a partner has bought or is buying your business previously bequeathed in your Will you may need to adjust your estate planning.

• When you want to change your trustee, or trust institution. You want to assign others to be in charge of investments within a testamentary trust directive.

• Legislation changes. Federal or provincial budgets have changed legislation affecting your estate planning. The validity of your Will may be affected by changes to laws.

• Taxation of the capital gains on a major asset. When you own an asset that has appreciated in value, such as a cottage or business, make sure the tax payable, will not decimate the estate. Life insurance solutions to pay off your estate liabilities after death, may be a more affordable option.