Taxes and Succession Planning

Taxes and Succession Planning

by FinancialFinancial PlanningLife ChangesTax Planning

You spend your whole life paying taxes, why should the last step into retirement be any different? As you prepare yourself and your company to be transitioned to the next generation of owners and operators it’s important to plan for the taxes associated with your succession plan. Be certain to discuss with your financial advisor and legal counsel to determine which succession plan is best for your tax situation. Here is a brief look into a few options available to someone who is wishing to retire or sell their business.

Selling shares held in your own name to an outside party

You are able to sell personally held shares, but they are subject to a capital gains tax. There is a lifetime exemption of $750,000.00 in qualified small business corporation shares that you may be able to apply to the sale of your business. This is a possible way to offset a portion of the capital gains tax; this should be discussed with your financial advisor.

Selling corporate assets or corporately-held shares to an outside party

Another option for selling the company is to sell the corporate assets or the shares of the business held by a corporation or a holding company. The types of assets sold and the amount of income generated by the sale will determine how the taxes are to be treated. Once the corporation has liquidated all of its assets and no longer operates, you can choose to either dissolve the corporation or keep it operating to hold some of the revenue generated from the sale as a way of deferring taxes. This income can be paid to shareholders as dividends over the course of time.

Estate Freeze

This method is best for transferring the ownership to a chosen successor, not an outside party. This is typically done by transferring the common shares into preferred shares and then issuing common shares to the beneficiaries. This essentially freezes the tax liability and allows the successor to come into the business with little investment contribution. This is a commonly used practice when it’s a family business and the next generation is taking over.

Succession planning can be an exciting time because it means the next chapter in your life is on the horizon. But be certain to plan closely with your financial advisor from The Beacon Group of Assante Financial Management Ltd. in order to achieve the most tax beneficial and best plan available to you and your company.

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Adjusting Financial Plans When Your Marital Status Changes

by Financial PlanningLife Changes

Any change in marital status is a significant life shift, and thus it should always be accompanied by a reevaluation of your financial health. Whether you are getting married, divorced, or have been widowed, you will have to update your will and adjust the beneficiaries of your pension plan and insurance plan. Additionally, any big change in life status presents a fitting opportunity to reassess your investments, family trusts, and estate planning.

Marriage

If you are planning to get married, you should evaluate your financial options long before “I dos” are exchanged. Marriage opens up a whole new realm of financial opportunities, whether you and your spouse will be combining incomes or a non-earning spouse needs financial protection. Your financial advisor from The Beacon Group at Assante Financial Management Ltd. can help you assess your options. Additionally, marriage is an opportunity to take advantage of beneficial tax planning strategies, like income-splitting and combined or transferred tax credits.

Divorce

At the other end of the spectrum from marriage is divorce, but it’s an equally important life event in terms of the financial implication. You must cope with a reduction in financial assurances, like adjusting to a single income. Whether you are the spouse who is receiving or paying a lump sum settlement, you must make arrangements to give or receive such a large sum. Finally, it would be wise to invest in disability or critical illness insurance in case you are ever forced out of work. The team at The Beacon Group of Assante Financial Management Ltd. will assist you in developing a comprehensive financial plan that protects the future of you and your children as you navigate this stressful life circumstance.

Remarriage

If you are getting remarried and there are children involved, you will need to update insurance coverage and possibly equalize education savings. Your financial advisor can also assist you with updating your estate plans, like creating a spousal trust. A spousal trust will provide for your current spouse until death, and be dissolved as assets for the children from your first marriage thereafter.

Widowed

When your spouse passes, it may be an overwhelming and emotionally trying time. Your financial advisor can help you navigate this difficult phase by managing the proceeds from investment funds, insurance, and your spouse’s estate. You can experience a sound financial future even with this often sudden and tragic change in marital status.

In order to ensure a stable transition should you experience a change in marital status, your best practice is to prepare in advance. Your financial advisor can help prepare you for a happy and financially secure future.

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3 Steps to Help Aging Parents Stay at Home

by AgingLife Changes

As your parents age, mobility limitations combined with an increase in care demands often require the move to a long-term care facility. Though long-term care facilities have their benefits, many seniors prefer to stay in the familiar and comforting environment that is their family home. In order to accommodate this request for your aging parents, there are three steps that must be taken.

Step 1: Assess Your Parents’ Needs

Many aging parents are able to live active and independent lifestyles well into their elderly years. For others, physical and cognitive difficulties necessitate 24/7 care from a healthcare professional. It is important to assess your parents’ needs for support and care and the level to which they can continue to conduct an independent lifestyle.

There are some conditions that clearly necessitate care, such as Alzheimer’s disease or an accident that has rendered your parent physically incapacitated. In other instances, you will need to keep a vigilant eye out for behaviours that indicate that your parent needs assistance. These behaviours may include mobility difficulties, forgetfulness with medication and bill payment, and trouble with daily tasks like meal preparation or bathing.

Once you have a better understanding of your parents’ needs, you will be able to draft a plan for support and arrange an appropriate level of funding to keep them at home.

Step 2: Evaluate Support Options

Once you have identified the particular needs of your parents, next you must evaluate what support is required and what is available. Between family support, provincial home care programs, private home care services, volunteer organizations, and errand services, can all of your parents’ needs be covered?

Some parents may only need occasional family support with running errands and providing companionship, which costs nothing but time. Others will require a 24/7 live-in caregiver to stay at home. You may be able to access many free or subsidized services, but there will likely be additional expenses required to help keep your aging parents at home.

Step 3: Arrange Funding

If your parents require the use of private services, you can calculate the monthly cost. Long-term care insurance, if purchased by your parents, can be used to cover some or all of the care expenses. If not, you must make arrangements to cover the cost of private home care.

The Beacon Group at Assante Financial Management Ltd.’s financial planning services can assist you with evaluating how to manage these monthly obligations. Your parents may also require financial planning to manage their savings.

As you navigate this process with your parents, it is wise to look ahead to your own future. Should you also decide to live out your older years at home, the financial decisions you make now will make this possible down the road. For more information about retirement planning, contact the Beacon Group at Assante Financial Management Ltd.