Videre Estate Planning Checklist

By planning for tomorrow today, you can protect what you’ve worked your whole life for, provide for the financial well-being of your loved ones and ensure your wishes are carried out. While there’s never a perfect time to talk about estate planning, planning ahead will save your loved ones time, money and uncertainty.

Succession Planning for Business Owners

Succession Planning for Business Owners

Business owners deal with a unique set of challenges. One of these challenges includes succession planning. A succession plan is the process of the transfer of ownership, management and interest of a business. When should a business owner have a succession plan? A succession plan is required through the survival, growth and maturity stage of a business. All business owners, partners and shareholders should have a plan in place during these business stages.

We created this infographic checklist to be used as a guideline highlighting main points to be addressed when starting to succession plan.

Needs:

  • Determine your objectives- what do you want? For you, your family and your business. (Business’ financial needs)

  • What are your shares of the business worth? (Business value)

  • What are your personal financial needs- ongoing income needs, need for capital (ex. pay off debts, capital gains, equitable estate etc.)

There are 2 sets of events that can trigger a succession plan; controllable and uncontrollable.

Controllable events

Sale: Who do you sell the business to?

  • Family member

  • Manager/Employees

  • Outside Party

  • There are advantages and disadvantages for each- it’s important to examine all channels.

Retirement: When do you want to retire?

  • What are the financial and psychological needs of the business owner?

  • Is there enough? Is there a need for capital to provide for retirement income, redeem or freeze shares?

  • Does this fit into personal/retirement plan? Check tax, timing, corporate structures, finances and family dynamics. (if applicable)

Uncontrollable Events

Divorce: A disgruntled spouse can obtain a significant interest in the business.

  • What portion of business shares are held by the spouse?

  • Will the divorced spouse consider selling their shares?

  • What if the divorced spouse continues to hold interest in the business without understanding or contributing to the business?

  • If you have other partners/shareholders- would they consider working with your divorced spouse?

Illness/Disability: If you were disabled or critically ill, would your business survive?

  • Determine your ongoing income needs for you, your spouse and family. Is there enough? If there is a shortfall, is there an insurance or savings program in place to make up for the shortfall amount?

  • Will the ownership interest be retained, liquidated or sold?

  • How will the business be affected? Does the business need capital to continue operating or hire a consultant or executive? Will debts be recalled? Does the business have a savings or insurance program in place to address this?

Death: In the case of your premature death, what would happen to your business?

  • Determine your ongoing income needs for your dependents. Is there enough? If there is a shortfall, is there an insurance or savings program in place to make up for the shortfall amount?

  • Will the ownership interest be retained, liquidated or sold by your estate? Does your will address this? Is your will consistent with your wishes? What about taxes?

  • How will the business be affected? Does the business need capital to continue operating or hire a consultant or executive? Will debts be recalled? How will this affect your employees? Does the business have a savings or insurance program in place to address this?

Execution: It’s good to go through this with but you need to get a succession plan done.  Besides having a succession plan, make sure you have an estate plan and buy-sell/shareholders’ agreement.

Because a succession plan is complex, we suggest that a business owner has a professional team to help. The team should include:

  • Financial Planner/Advisor (CFP)

  • Succession Planning Specialist

  • Insurance Specialist

  • Lawyer

  • Accountant/Tax Specialist

  • Chartered Life Underwriter (CLU)

Next steps…

  • Contact us about helping you get your succession planning in order so you can gain peace of mind that your family is taken care of.

10 Essential Decisions for Business Owners

Business owners can be busy… they’re busy running a successful business, wearing lots of hats and making a ton of decisions. We’ve put together a list of 10 essential decisions for every business owner to consider.

Insured Retirement Program

There are a number of mechanisms available for individuals to save in a tax-efficient manner for their retirement – from employer-sponsored pension plans to government plans, RRSPs (registered retirement savings plan) or TFSAs (tax free savings account). But, for those who earn a higher income and wish to contribute more to their pension savings than they can benefit from under the plans which are subject to annual caps, options can be limited. The insured retirement program is an effective way to bridge the retirement savings gap for such individuals in a cost-effective way.

Who is the insured retirement program best suited to?

  • Individuals who already contribute the maximum allowable amounts to both RRSPs and employer-sponsored pension plans but want to save more for their retirement are ideal candidates for this program.

  • Individuals at least fifteen years away from retirement so they can accumulate enough funds inside their life insurance policy for collateralization.

  • Individuals that are comfortable with the concept of borrowing.

How does the insured retirement program work?

This program works with the concept of collateralization in the following way:

  • Individual takes out a universal life (or eligible whole life) insurance policy and subsequently makes sizable cash deposits into it. These deposits grow within the policy on a tax-sheltered basis providing that the funds remain in the policy and are within the maximum allowable limit.

  • Upon the retirement of the policyowner, the funds within the policy may be used as collateral in order to take out a loan.

  • This loan can provide valuable cash for the retiree, in order to purchase an annuity or to use as income, via a series of short loans.

  • When the retiree dies, the loan is repaid and the remaining balance can be distributed among their beneficiaries.

Are there any pitfalls associated with the program?

As with all investment strategies, there are some risks. Namely, in this case, the fact that the program involves incurring a debt, borrowing funds and interest rate changes means that investors need to be comfortable with the unlikely but possible fact that the bank calls the loan or that changes in tax rules negatively impact them.

The insured retirement program can be smart way for high earners to maximize their retirement income in a tax effective manner. Contact us today to learn more about this opportunity and allow us to work in partnership with you to understand your unique needs and requirements and create a retirement strategy that works for you.