Estate planning considerations for business owners and entrepreneurs
When Steve and Colin Wilson’s father passed away, he left behind a potentially hefty tax bill. With some help, the Wilsons were able to restructure the estate. Now the owners of Wilson’s Lifestyle Centre in Saskatoon are getting a head start on their own estate plan.
It’s been a while now since Steve and Colin Wilson’s father passed away. The co-owner of Wilson’s Lifestyle Centre in Saskatoon admits it was difficult at the time, 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 father thought he had done everything right; after all, he had a last Will and testament in place. He also 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 years ago, [we were] 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 and entrepreneurs 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 your assets may pass tax-free to your spouse upon your passing, your assets might not pass as easily to 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 Dawson points out one scenario that can occur when Wills are outdated: Executors may have left the country in the meantime or are otherwise unable to perform the duties. She says for this reason and others, 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 owner’s 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 help 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 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
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