It’s been a year since Steve and Colin Wilson’s father passed away. The co-owner of Wilson’s Lifestyle Centre in Saskatoon admits it’s been difficult, especially when some gaps in his father’s estate plan left them scrambling to address a potentially huge tax burden left to the family.
Steve Wilson’s dad thought he had done everything right; after all, he had a Will in place. He had substantial assets including a successful greenhouse business and an expanse of land in Saskatoon that had grown exponentially in value over the years. But as the Wilsons learned, holding a Will and making a detailed plan for the successful transfer of assets and wealth are two completely different things.
“Stuff that should have been done five years ago, we’re now scrambling to get it all done in six months,” says Wilson.
A good financial and legal team have helped the Wilsons restructure the inheritance to help minimize the significant tax liability they were facing. Steve Wilson is pleased his father’s legacy and hard work can be preserved.
Tannis Dawson, High Net Worth Planner with TD Wealth, hopes other business owners will take heed and ensure that they are on top of their own estate planning. She offers these considerations for business owners:
1) Plan for taxes when you die
While assets may pass tax-free to a spouse upon your passing, that’s not the case for children and other beneficiaries. If you leave land or a business, taxes need to be paid on the asset’s value. If you don’t plan for that tax bill, you could leave your beneficiaries cash-poor or you could leave some of your small business capital gain exemption on the table. Life insurance may be a way to fund the transfer of a business without incurring a hefty tax bill.
2) Keep your Will up to date
Our lives change, and so do the value of our assets. Dawson encourages individuals to keep their Will and Powers of Attorney up to date so there‘s no uncertainty about your wishes when the time comes. Dawson points out one scenario that can play out when Wills are outdated is that executors may have left the country or are otherwise unable to perform the duties. She says a business succession plan should be created and reviewed regularly. “It’s important to have thorough plans for a smooth transition that meets the business owners‘ objectives and clearly states their wishes,” says Dawson.
3) Discuss your wishes
If possible, discuss your wishes for your business and your assets with your family to eliminate surprises. It may be uncomfortable, but it can be important to factor in your beneficiaries‘ wishes when detailing your estate plan. “It would be unfortunate to leave a valuable business — your life’s work — to someone who has no interest in running it,” says Dawson. “Work with your successors to ensure the business will continue, and how it will transition when you are unable to run things.“
This experience really imparted the importance of estate planning to Steve Wilson, and he is beginning his own estate planning process. He is trying to make his plans as turn-key as possible for his own children, so that they won’t have to face the scramble he did.
| Denise O’Connell