Incorporating Your Business into Your Estate Plan: A Step-by-Step Guide

As a small business owner or entrepreneur, you have invested time, energy, and resources into building a successful business. But have you considered how your business fits into your broader estate plan?

Many business owners overlook the importance of integrating their business into their estate plan, which can lead to complications and uncertainties down the road. In this step-by-step guide, we will explore practical steps and considerations to help you integrate your business seamlessly into your estate plan.

Understanding the Importance of Estate Planning for Business Owners

Bringing your business into your estate plan is crucial for several reasons. Firstly, it ensures a smooth transition of ownership and management in the event of your incapacity or passing. By clearly outlining your wishes and intentions in your estate plan, you provide guidance to your loved ones and prevent potential disputes.

Secondly, it allows you to minimize tax liabilities and maximize financial benefits for both you and future generations.

Lastly, it provides peace of mind, knowing that your hard work will continue to benefit your family and legacy.

Step 1: Evaluate Your Business Structure

The first step is to evaluate your business’ current structure. Do you operate as a sole proprietorship, partnership, or corporation?

Each structure has different implications for succession planning, taxes, and liability protection. Consider consulting with a legal professional specializing in business law or your accountant to ensure you choose the most suitable structure for both your business and estate planning needs.

Step 2: Identify Key Assets and Liabilities

Next, identify the key assets and liabilities of your business that need to be addressed in your estate plan.

This includes tangible assets such as real estate, equipment, inventory, as well as intangible assets like intellectual property rights and customer contracts. Additionally, consider any outstanding debts or obligations your business may have. By understanding the value and nature of these assets and liabilities, you can make informed decisions regarding their distribution and management in your estate plan.

Step 3: Determine Succession Planning Strategies

Succession planning is a critical aspect of business planning, period, but it’s also important to consider for your estate plan.

Who would you like to take over the management and ownership of your business when you are no longer able to do so? This may involve grooming a family member or key employee for leadership roles, selling the business to a third party, or creating a trust to hold and manage the business assets on behalf of your beneficiaries. Each option has its own advantages and considerations, so it’s essential to carefully evaluate which strategy aligns with your long-term goals.

Step 4: Consult with Legal and Financial Professionals

Integrating your business into your estate plan requires expertise in both legal and financial matters. Seek guidance from professionals experienced in estate planning, such as lawyers specializing in business succession and accountants familiar with the intricacies of small business ownership like the team at Avisar.

These professionals can help navigate complex legal requirements, ensure compliance with tax laws, and provide personalized advice tailored to your specific circumstances.

Step 5: Update Your Estate Planning Documents

Once you have assessed your business structure, identified key assets and liabilities, determined succession planning strategies, and consulted with professionals, it’s time to update your estate planning documents accordingly.

Review your will, trusts, power of attorney designations, and any other relevant documents to ensure they reflect your intentions regarding your business. Be sure to clearly specify how you want your business to be managed and transferred after your passing or incapacity.

Considerations for Family-Owned Businesses

If you own a family-owned business, additional considerations come into play when including it in your estate plan. Balancing the interests of multiple family members can be challenging, so open and honest communication is crucial.

Consider creating a family agreement that outlines the governance and decision-making processes for the business. This document can help prevent conflicts and ensure a smooth transition of ownership from one generation to the next.

Tax Implications to Consider

Incorporating your business into your estate plan involves considering various tax implications. Consult with a tax advisor to understand how different strategies may affect your estate and gift taxes, as well as income taxes for both you and your beneficiaries.

Explore options such as gifting shares of your business during your lifetime, utilizing trusts to minimize tax liabilities, or taking advantage of applicable deductions and exemptions.

Common Challenges and How to Overcome Them

Including your business in your estate plan may present some challenges along the way. One common challenge is ensuring fairness among heirs who are actively involved in the business versus those who are not.

Consider implementing mechanisms like buy-sell agreements or life insurance policies to equalize inheritances while preserving the continuity of the business.

Another challenge is maintaining confidentiality regarding sensitive business information during the estate planning process. Work closely with your legal advisors to protect trade secrets and confidential data while still achieving your estate planning objectives.

We explored a number of other potential challenges in our last post, which we’d recommend you also review when considering your estate planning.

Estate planning can be complex, but you don’t have to do it alone. Remember to consult with professionals specializing in business law, taxation, and estate planning to ensure that all legal requirements are met and that you make informed decisions tailored to your specific circumstances.

Book a free consultation with one of Avisar’s estate planning experts to get all of your questions answered.

With careful planning, you can leave a lasting legacy that continues to thrive long after you’re gone.

Federal Budget 2024: Previously Announced Measures

estate planning for blended families

Navigating Estate Planning for Blended Families: A Guide

Estate planning is an essential aspect of planning for your family’s financial future, and it’s particularly important and delicate for blended families. The dynamics of bringing separate individuals together as a blended family create unique considerations when planning for the next generation. Here’s a guide to how you can ensure your family’s financial future is well protected.

Understanding Estate Planning for Blended Families

Estate planning for blended families requires one to take into account the unique dynamics that past relationships, biological relationships, and current relationships create. Bringing two distinct sets of parents and children together is not easy — nor is planning for all members’ financial futures.

Some common issues that blended families frequently face are issues such as:

  • How to meet the needs of all family members
  • How to manage unequal assets and incomes
  • What a fair distribution of assets looks like
  • Whether children’s inheritance should wait for the death of a step parent
  • What inheritances from separated spouses might provide
  • Other issues, such as those already faced in other areas of life

These are not small matters, and they’re bound to bring forth some disagreements that must be worked through. The goal is to work through those with clear and honest communication, as this is how you can keep disagreements from becoming outright conflicts.

Of course, working with an experienced lawyer, accountant and financial planner can be a great help when working through these matters.

Estate Planning Strategies for Blended Families

There are multiple estate planning strategies that families can use to execute their desires. Estate planning for blended families is no different:

  • Will: One of the most crucial aspects of anyone’s estate planning is creating a well-drafted will. A will serves as a legal document outlining how your assets will be distributed upon your death, ensuring your wishes are carried out and potential disputes among family members are minimized.
  • Trust: Trusts offer a controlled and flexible way to distribute assets to beneficiaries. This tool allows you to specify when and how your beneficiaries receive their inheritance, providing an added layer of control over asset distribution. It also might have implications in how your savings are spent (or not spent) during senior years. Trusts can be especially useful for blended families that might want to navigate having children in different life stages.
  • Beneficiaries: Beneficiaries are the ones who receive benefits from insurance (e.g. life insurance) and retirement accounts, and the funds can usually be distributed without going through probate when a person is a named beneficiary. Make sure to update any named beneficiaries of accounts after establishing a new blended family. This typically requires filing a simple form.
  • Documents: It’s important to plan for incapacitation due to health. Make sure you know who will make decisions, and how they’ll best follow your wishes. Taking care of this requires a living will (for financial matters) and a medical power of lawyer (for healthcare/end-of-life decisions). These may have to be redone after establishing a blended family, if your choice of who takes on each role changes.

All of these should be prepared in concert with an lawyer so that forms are legal, properly established, and thorough.

Special Considerations for Blended Families

Every blended family is unique and has its own nuances to navigate. There are certain special considerations to most blended families, though. When estate planning for blended families, all parties should be aware of the difficulties that are inherent in:

  • Navigating relationships between biological children and stepchildren
  • Ensuring the surviving spouse is financially taken care of
  • Managing existing conflicts between various family members
  • Handling tax implications that can be extensive and substantial

Again, the key to doing this successfully is open communication and working with knowledgeable professionals. Those who are familiar with the nuances of estate planning for blended families are a great resource and guide for this process.

Get Help with Estate Planning for Blended Families

No matter what your family structure is, don’t neglect to properly go through the estate planning process. If you’re estate planning for a blended family, don’t let the additional challenges stop you from tackling this.

If you have a blended family in the British Columbia area, seek professional help for the best potential process and outcome. We at Avisar Chartered Professional Accountants are here to help. We’ve worked with many blended families, are a leading firm that offers estate planning in BC, and are ready to help you.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Federal Budget 2023: Previously Announced Measures

Budget 2023 confirms the government’s intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release.

  • Legislative proposals released on November 3, 2022 with respect to Excessive Interest and Financing Expenses Limitations and Reporting Rules for Digital Platform Operators.
  • Tax measures announced in the Fall Economic Statement on November 3, 2022, for which legislative proposals have not yet been released, including: automatic advance for the Canada workers benefit; investment tax credit for clean technologies; and extension of the residential property flipping rule to assignment sales.
  • Legislative proposals released on August 9, 2022, including with respect to the following measures:
  • borrowing by defined benefit pension plans;
  • reporting requirements for Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs);
  • fixing contribution errors in defined contribution pension plans;
  • the investment tax credit for Carbon Capture, Utilization and Storage;
  • hedging and short selling by Canadian financial institutions;
  • substantive Canadian-controlled private corporations;
  • mandatory disclosure rules;
  • the electronic filing and certification of tax and information returns;
  • Canadian forces members and veterans amounts;
  • other technical amendments to the Income Tax Act and Income Tax Regulations proposed in the August 9th release; and
  • remaining legislative and regulatory proposals relating to the Goods and Services Tax/Harmonized Sales Tax, excise levies and other taxes and charges announced in the August 9th release.
  • Legislative proposals released on April 29, 2022 with respect to hybrid mismatch arrangements.
  • Legislative proposals released on February 4, 2022 with respect to the Goods and Services Tax/Harmonized Sales Tax treatment of cryptoasset mining.
  • Legislative proposals tabled in a Notice of Ways and Means Motion on December 14, 2021 to introduce the Digital Services Tax Act.
  • The transfer pricing consultation announced in Budget 2021.
  • The income tax measure announced on December 20, 2019 to extend the maturation period of amateur athletes trusts maturing in 2019 by one year, from eight years to nine years.
  • Measures confirmed in Budget 2016 relating to the Goods and Services Tax/Harmonized Sales Tax joint venture election.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

retirement planning tips canada

Retirement Planning Tips from an Expert

Learn innovative retirement planning tips and strategies from an expert: Adam Bornn, CFP, Partner, Parallel Wealth Financial Group. A complete transcript can be found below the video for those who prefer to read.

Retirement Planning Tips Canada – Transcript

“Hi, my name’s Adam Bornn from Parallel Wealth.

Today I want to talk about retirement planning and a lot of you focus on building up for retirement, but when it comes time to retire, there are a lot of important decisions you need to make. When to take your CPP? When to take your old age security? How to draw down your registered accounts?

There’s a lot that goes on between your income stream and your tax stream. So today I want to talk a little bit about things you need to think about as you head into retirement and a couple retirement planning tips that you should probably implement within your retirement plan to make it more efficient as far as giving you more after-tax income and paying less tax to CRA.

I want to share the planning software that we use here, and this is called Snap Projections. Now, if your financial planner isn’t putting a plan like this together for you, loop back with him or her and have them do this. This is part of the service that you should be paying for with your financial planner.

So what we have here is a husband and wife, they turn 65 in 2022, and they’re looking to retire. They need to transition from saving up to join an income stream. And so you’ll see here if we plug in their information, so we have some CPP, some old eight security coming in, and they each have $300,000 of RSP and 100,000 of tax-free savings that they’ve saved up and built up over time.

If we take this client, put in their information, their assets, their CPP, and map them out all the way until age 90, so assuming they’re going to live till age 90, you can see on the left-hand side here a real dollar income.

We put a 2% inflation rate in this plan of $68,694. So that is their after-tax income on an annual basis from today, age 65 retirement all the way down to age 90. The nominal dollar beside it is just the actual dollar amount they were going to have in their pocket to spend every single year. So 6$8,694. Again, this has him starting CPP right away at 65, old age security at 65 as well, and starting to draw down on the registered accounts.

If I go into Mr. YouTube here, you’ll see his CPP amount, his old aid security amount, and then again he’s taking about just shy of $12,000 out of his RRSP or RRIF at that point and about $9,000 from his TFSA. And he’s paying average tax rate or effective tax rate of just shy of 6%, so it doesn’t look too bad. And again, a nice little income in retirement of $68,700 after tax.

Now while that plan looks really good, provides a good income, and that’s typically the type of plan you’re going to get from an advisor if you get a plan at all. But what you want to look at is, okay, well what happens if I delay my CPP or delay my old age security or draw up my accounts a little bit differently? What is the total tax bill? And so again, on that plan there that you guys were looking at, the total tax bill was $227,000.

So that’s the total amount of tax they’re going to pay from age 65 until age 90. When you build out a financial plan, ask like how much tax am I paying? What is my after-tax income? What does my estate look like? Again within this plan, if I click on that total tax bill, that’s where you see that $227,000 of total tax, that’s combined.

One of the issues I have with your stock plan, which is what we’re looking at here, is if we scroll down to age 86, which is near the bottom here, you’ll see we have a bunch of RRSPs or RRIFs left at that point, close to $300,000, which create a tax bill, right?

If both Mr. And Mrs. YouTube passed away, there’d be a tax bill of about $111,000, which obviously we want to try to avoid. And the better we can avoid that tax bill and kind of that money into your pocket versus series later, obviously that’s much better. So how do we do that?

So when billing out a clear and concise financial plan for our clients, we look at a couple things. Deferring CPP is one of the biggest things. And at the end of the day, we’ve put hundreds of these plans together, and I can tell you that for 99% of Canadians, you should be delaying your CPP, your Canadian pension plan, all the way to age 70 or as close to 70 as possible.

Typically, we would only recommend taking your CPP prior to age 70 or closer to 65 for that matter, is if you had a health issue or you just needed the income, like there was no other income sources to draw from and you had to draw on your CPP just to put food on the table and pay the bills.

So, let’s take a look at the same plan here, but what we’ve done is we’ve bumped a CPP until age 70, and you’ll see that in the CPP column here. Now we’ve left old age security at 65. There’s more of a benefit to delay your CPP than your old age security. I won’t go into that in this video. We’ll cover that on a future one, but if we defer that CPP until 70, that’s going to help us out.

Now the other thing I’ve done that I’ve kind of stepped into here as well is we’ve done what we call the RRSP meltdown, and that is drawing down your registered accounts as quickly but as taxed efficiently as possible. And you’ll see here in the RRSP, so we’ve converted to a RIF and we’re drawing out about $30,000 a year until CPP starts at 70. Then we’ve scaled it back to $20,000.

What’s nice is that registered account is gone by 83, 84, so life expectancy 86, 87, that registered account is gone by the time you pass away. Now you still have that TFSA account that you can use, draw money out tax free. It’s much more efficient type of plan.

One of the other pieces of the plan when you build it like this, is not only by 83, 84, there’s no estate tax because you’ve drawn out all your RIF account or registered accounts at that point, but your only income is coming in from CPP and OAS and your tax free savings account, which is non-taxable.

Later in life. If you have to go to a care facility or you need in-home care, most institutions will build you off of your income. Now again, you could have the same income, but because it’s coming from the tax free savings account, it’s not taxable income.

So that’s one of the big benefits that we see with our elder clients in that you have the same income, but a lot of it’s not taxable, which allows you to pay a little bit less tax for rather your care facility or in-home care.

So by delaying that CPP from 65 to 70 and by drawing down your RIF account, your registered accounts, in a more tax efficient manner, and again, if you have RSPs and LIRAs and other accounts, it’s the same process. You want to draw those out in an efficient manner by life expectancy, kind of your mid 80s.

And if we do that in this plan, you can see that real dollar after tax income jumps closer to $70,000. It’s almost $1,000 more after-tax adjusted for inflation every year from age 65 to 90. So quite substantial.

Not only that, but if we look at your tax bill, we’ve reduced it from $227,000 down to $191,000. And lastly, if we look at age 86, scroll over estate tax is going to be $0. So again, it’s a much more efficient type of plan to create if you’re looking to create more income, more after-tax income, less taxes, and a better estate plan.

Typically defer your CPP using that time where you’re not collecting your CPP but need an income to start drawing down on your registered accounts.

What I want to close with today is what we call the laddered income. And this is kind of the last step of the process. We’ve created the tax and income strategy and created the most efficient plan that we can create. But now I want to create an income stream that better matches your lifestyle in retirement.

There’s a lot of research done around this, but from data retirement till about 71 to 73 years old, that’s kind of your, we call a go-go phase of retirement.

So there’s three phases of retirement. Your go-go phase until we typically map it until 75. Then from 76 to 85, it’s your slow-go stage. You might do a bit of travel, you’re still spending a bit of money, but you scale back. And then from 86 onward, it’s your no-go stage. You’re not spending much, you’re not doing much. It’s a much lower expense time of life for you moving forward.

So, I want to create more of a laddered income strategy. So if I take that same scenario that we just looked at and ladder it out, here’s what it looks like.

So again, instead of $69,600 per year, we’ve laddered it out at $75,000. So giving you more early, you can travel more, you can spend more money, Let’s allow you to do that. So $75,000 all the way down to age 75. Then we’ve scaled it back to $65,000 from 76 to 85, and then down to just shy of $61,000 later in life.

So still lots of money later in life, enough to pay the bills. And again, for those of you that have real estate, typically you wouldn’t sell real estate in the plan, you might downsize if you want to downsize, but if you have to go to a care facility or need in-home care, there’s always that asset in the background to lean on.

Plus you still have $5,000 after tax of income from 85 onward. I don’t know any clients of mine that are spending that amount of money at that point in their life, it’s typically 1,500 to $2,500 a month. So there’s lots of free cash flow there to help for a care facility or in-home care for those of you that are worried about that.

So hopefully that gives you a bit of a glimpse on what you should be looking for when your financial retirement plan is built out. Again, you want to look at when is the best time for you to take your CPP and hold date security and again, have your advisor run that for you and show you the differences of taking it now, whatever that means for you, 65, 70, somewhere in between, same with your old date security, look at the tax situation, your estate tax situation.

All these things come into play. Again, you want to create the most efficient tax and income strategy for you, and then look to create that laddered income. Again, you want more money early in retirement, but with the peace of mind that you’re going to have enough later in life.

I know doing this for the last 17 years that most people when they hit retirement, they’re not spending enough money early in retirement. What creating that laddered strategy does is it gives you that peace of mind of look, I can go spend that $75,000 knowing that I still have 60 later on in life.

So thanks again for joining me again in this video. Hope you enjoyed it. Hopefully you learned something through these retirement planning tips and we’ll do this again soon. Thank you.”

You can get more great insights and tips from Adam on his own YouTube channel.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

commercial real estate investing

Why Commercial Real Estate Chose Me As An Investor

Our guest expert for this post is Darcy White of Westred Partners Inc. You can learn more about him at the end of this post.

Robert Kiyosaki, in his 44 million copy selling book on personal finance, Rich Dad, Poor Dad: What the Rich Teach their Children about Money that the Middle Class and Poor do Not! (1997) offered, as a teaching metaphor, a comparison between his highly educated and successful father (Poor Dad) and his less educated entrepreneurial best friend’s dad (Rich Dad). His own father, a high earning professional, suffered by comparison to the low wage, entrepreneurial dad who is revealed to eventually own a portfolio of high equity commercial real estate.

I have lived Kiyosaki’s metaphor. My father was an electrical contractor who built sawmills and dry kilns all over Western Canada. He was a capable, honest, and respected tradesman, and I am proud to be his son and carry his name. My father-in-law was a real estate developer, landlord and investor. And, while I owe much of what I have to both of these two men, I am not an electrical contractor. I own and manage a real estate investment company that I have named after my father-in-law.

Over the past 22 years I have created, financed, and led three different investment companies focused upon identifying distressed commercial real estate (CRE) properties with unrealized, or latent value. I have purchased, renovated, re-financed, and eventually realized a favorable return on investment in them.

CRE encompasses residential housing, warehousing, retail, and office spaces, and each has a risk profile that is influenced the quality of the building and lands, security of tenancies, prevailing capitalization rates, interest rates, and always “location, location, location.”

Risk vs Reward

When my partners and I undertake a commercial real estate project, we believe that we are engaging in a predictable, projectable, and a low-risk enterprise. Commercial real estate (CRE) has its specific and endemic risks, however, as an asset class it can be purchased with leverage, appreciates faster than the inflation rate, has relatively weak management competition, and is operationally uncomplicated.

Returns on Investment

Returns in real estate are taxed or tax-deferred, and, depending upon your investment goals, can be timed for tax efficiency. Payment of mortgage principal are taxable. So are the incomes after allowable expenses. However, asset appreciation in the market, which can be substantial is deferred and can be timed through refinance or sale of the asset.

Operational Expectations

A good manager might be able to realize double-digit annual returns in the range of 4% capital repayment, 4% free cash from operations and 4% market appreciation. However, paying down principal, refinancing, raising rents, and improving operational efficiencies can improve those returns every year.

Limitations of Commercial Real Estate Investing

While there are varied ways to participate in a CRE investment, usually the bar for investing, outside of a registered fund, is high. To be clear, CRE is not usually the way to make a quick buck. All investments are measured “over time,” and real estate is no different. Good commercial real estate investing is a patient process and may not be for all investors.

Recommendations for Investing in Commercial Real Estate

I am not an evangelist; however, I do urge those involved in high income, low asset value businesses to consider adding well-chosen, investment class real estate to their financial portfolio. Participating in CRE can be as simple as renting a (legal) suite in your home, owning your business’ facility, participating in RRSPs that include real estate, or partnering in a syndicated real estate partnership. I have participated in all the above, and in the right circumstances, I regard each as a reasonable approach to building wealth. 

Cautions

However, like all financial decisions, I would counsel engaging industry professionals: financial planners, accountants, and legal counsellors in the process. There are no shortcuts to executing a good financial plan, and the cost of fixing one is high. As an aside I must acknowledge that my progress and results are evaluated, accounted for, and reported on for taxation, right here at Avisar.

Acknowledgements

If I were to advise my hardworking father in 1982, I would have insisted that he invest some of the earnings from his best years into commercial real estate. When he retired in 1996 and laid down his tools, his earnings ceased with the collection of his last outstanding account. By comparison, when my asset-rich father-in-law retired in 1996, his net worth increased in value more than 150% over the next decade while his earnings continued to rise. Moreover, he was able to exercise provisions in the Canadian Tax Act to optimize his CPP, OAS, wage, shareholder provisions, and a host of other rights available to him (See your professional accountants at Avisar for more on this 😊).

I need to come clean. I did not research and discover real estate – I was neither that prescient nor clever. Rather, real estate found me. My father-in-law invited me to join him and manage his real estate assets. However, I was a willing student and quickly discovered that I loved what I do working in real estate.

I love my work.

Finally, to be clear, both of my fathers were rich in the ways that truly mattered. Both were beloved spouses, good parents, and doting grandfathers. They were dear friends to many, supporters of numerous charities, community builders, and good men. These were truly great men, and their legacy extends beyond their net worth.

For the record, I also recommend carry-on luggage, paying for tour guides in museums, purchasing good shoes, always stopping on road trips for go-carts and ice cream, buying as good a wine as the occasion demands, tipping, and splitting the entre.

I podcast weekly at: https://soundcloud.com/advanced-rei

I write on real estate, leadership, and dadding at: www.darcywhite.ca

And I can be reached at: darcy@westred.ca Cheers to meaningful work, community building, and making a difference!

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

estate planning checklist

The Ultimate Estate Planning Checklist: Business and Personal

If you’re like most Canadians, you probably haven’t given a lot of thought to having a plan for after you pass and aren’t sure where to start. That’s why we compiled this helpful estate planning checklist for business owners and individuals.

According to a 2018 Angus Reid poll 51 percent of Canadians had no will in place, and only 58 percent of those 55 and older had one. And a will is only one element of your estate plan.

It’s not something most of us like to dwell on, but having a plan in place for what happens to your assets after you pass will make it much easier for your loved ones in a time when they are already coping with the emotional toll of your death. Use this estate planning checklist to ensure you have the right pieces in place.

Estate Planning Checklist for Individuals

There are two key documents that make up the first two items on our estate planning checklist:

Power of Attorney

A power of attorney, also called a living will, sets out who will make decisions on your behalf should you become unable to do so. Be sure this is someone you trust and that they are aware of your wishes under various circumstances.

Your Will

Your will is the cornerstone of your estate plan. It sets out how your assets will be distributed and who will oversee the process (your executor). Some things you will need to decide/document in your will:

  • A list of your assets
  • Beneficiaries (are there specific items you want to leave to certain people, or will your assets be divided equally between all beneficiaries?)
  • If your beneficiaries are minors do you have a trust or guardian in place?
  • Are you donating any assets to charities?
  • Who is your executor? This is the person responsible for carrying out your wishes as outlined in your will. You can name one or more people to this role and you should peak to your executor to be sure they are willing and able to carry out their duties.

Other items to consider when creating your estate plan include:

  • Funeral wishes – ensure your family is aware of your wishes in case your will is not read until after the funeral
  • Life insurance – make sure all beneficiaries are up-to-date
  • Location of key documents – make sure your family is aware of the location of key documents like your will and power of attorney
  • Digital assets – most of us have multiple social media profiles and accounts with various online entities. Compile a list of these, including passwords, and make sure your family is aware of how you want them dealt with after your death or incapacitation.

Estate Planning Checklist for Business Owners

If you’re a business owner you also have to think about how your business assets and responsibilities will be dealt with when you die. In addition to the items in the individual estate planning checklist, here are some items you may consider depending on your situation:

  • If you are a Sole Proprietor your business assets and liabilities will be treated as personal and should be accounted for in your will
  • Have a succession plan in place
  • Who will deal with closing your CRA account if the business will be dissolved?
  • Creating an emergency business plan
  • If you have partners or shareholders, prepare shareholder/partnership buy-sell agreements or other contractual arrangements
  • Should you create a holding company for your assets?
  • Is an estate freeze necessary to protect against capital gains?        

Estate Planning with Your Accountant

Most people think about lawyers when they think about estate planning, and certainly they are important when preparing your will and power of attorney. But working with your accountant can help you create an estate plan that ensures your goals (personal and professional) are achieved.

An accountant can provide insights and develop a plan that minimizes the tax implications to your estate and beneficiaries, and make the process as easy as possible for your loved ones. At Avisar, we help our clients with:

  • Will review and planning, including written instructions to a lawyer
  • Assessing the appointment of executors
  • Succession planning including potential business re-structuring
  • Advising on the use of trusts and additional companies
  • Estate freezes
  • Analysis of methods to preserve wealth
  • Recommendations for the possibility of incapacitation
  • Coordinating with your insurance broker to cover potential taxes and debts
  • Advising your executor after you’re gone

If you haven’t started your estate planning yet use this checklist to get started and then schedule a free consultation with one of our estate planning experts to discuss how we can help ensure your estate plan will achieve your goals.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Federal Budget 2022: Previously Announced Measures

Budget 2022 confirms the government’s intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release:

  • Legislative proposals relating to the Select Luxury Items Tax Act (a tax on certain automobiles, boats and aircrafts) released on March 11, 2022.
  • Legislative proposals released on February 4, 2022 in respect of the following measures:
  • electronic filing and certification of tax and information returns;
  • immediate expensing;
  • the Disability Tax Credit;
  • a technical fix related to the GST Credit top-up;
  • the rate reduction for zero-emission technology manufacturers;
  • film or video production tax credits;
  • postdoctoral fellowship income;
  • fixing contribution errors in registered pension plans;
  • a technical fix related to the revocation tax applicable to charities;
  • capital cost allowance for clean energy equipment;
  • enhanced reporting requirements for certain trusts;
  • allocation to redeemers methodology for mutual fund trusts;
  • mandatory disclosure rules;
  • avoidance of tax debts;
  • taxes applicable to registered investments;
  • audit authorities;
  • interest deductibility limits; and
  • crypto asset mining.
  • Legislative proposals tabled in a Notice of Ways and Means Motion on December 14, 2021 to introduce the Digital Services Tax Act.
  • Legislative proposals released on December 3, 2021 with respect to Climate Action Incentive payments.
  • The income tax measure announced in Budget 2021 with respect to Hybrid Mismatch Arrangements.
  • The transfer pricing consultation announced in Budget 2021.
  • The anti-avoidance rules consultation announced on November 30, 2020 in the Fall Economic Statement, with an expected paper for consultation over the summer of 2022, and legislative proposals tabled by the end of 2022.
  • The income tax measure announced on December 20, 2019 to extend the maturation period of amateur athletes trusts maturing in 2019 by one year, from eight years to nine years.
  • Measures confirmed in Budget 2016 relating to the GST/HST joint venture election.

Budget 2022 reiterates the government’s intention to return a portion of the proceeds from the price on pollution to small and medium-sized businesses through new federal programming in backstop jurisdictions (Alberta, Saskatchewan, Manitoba and Ontario). Budget 2022 proposes to provide funds, starting in 2022-23, to Environment and Climate Change Canada to administer direct payments to support emission-intensive, trade-exposed small and medium-sized enterprises in those jurisdictions.

Budget 2022 also reaffirms the government’s intention to revise the Employment Insurance (EI) system, including its support for experienced workers transitioning to a new career and coverage for seasonal, self-employed and gig workers. A long-term plan for the future of EI will be released after consultations conclude. As an interim measure, Budget 2022 proposes to extend previous expansions to EI coverage for seasonal workers.

The Difference Between Capital Gains and Investment Income

Can Smart Capital Gains Financial Planning Save You Money?

What are capital gains? The profit people generate from selling an asset or investment is typically referred to as a “capital gain.” The term has also become synonymous with taxation, because a percentage of the profit margin may end up in the government’s coffers. But it’s important to understand that not every asset falls under the capital gain rules. Financial planners and accountants have strategies to utilize to minimize tax liability.

How Are Capital Gains Taxed in Canada?

Profits made from selling items such as stocks, bonds, mutual funds, and exchange-traded funds generally fall under capital gain rules. The same applies to tangible assets, such as rental properties, second homes, equipment, and luxury items, which also may be subject to after-sale taxation. Principle homes generally are exempt as long as they remain a primary residence.  

Although there is not necessarily a “capital gains tax” explicitly written into law, 50 percent of the profit earned from the sale of an asset becomes taxable. The rate of taxation is based on the person’s marginal tax rate. For instance, if you sold a second home for $100,000 above the purchase price, minus expenses, you’d apply $50,000 (half) to your taxable income. If you’re in the 33 percent bracket, then one-third of the $50,000 goes to taxes. The remaining two-thirds plus the untaxed $50,000 are free and clear profit.

That’s why it’s crucial to maintain diligent records regarding reasonable expenses associated with an asset. Fees, commissions, maintenance, advertising, and improvements are generally deducted from the amount of capital gain total and potential taxes.

The Difference Between Capital Gains and Investment Income

It’s not uncommon for people to find the difference between capital gains and investment income confusing. This holds particularly true when dealing with investment opportunities such as stocks.

While the two are not necessarily mutually exclusive, investment income generally refers to ongoing profits. Dividends on a lucrative stock or monthly rent payments from a real estate property are examples of investment income. They are not subject to the same tax formula as a capital gain generated from the sale of an asset.

How to Minimize Taxes on Capital Gains

The fact that someone makes a hefty profit on the sale of an asset doesn’t mean they must pay the full face value in taxes. A savvy accountant may employ the following strategies to reduce capital gains tax liability.

  • Establish Tax Shelters: These financial umbrellas shield investments and allow people to buy and sell stocks in a duty-free environment. Shelters such as a Registered Retirement Savings Plan, Registered Education Savings Plan, and Tax-Free Savings Account rank among the popular ways Canadians manage wealth without incurring taxes on annual capital gains. However, tax shelters do limit your ability to deduct capital losses.
  • Deduct Capital Losses: Sometimes, people become hyper-focused on paying taxes on profits and overlook losses. This scenario proves common with real estate investments. Property owners may lose track of the ongoing expenses, fees, taxes, interest payments, and wide-reaching other costs. Although you may have earned sound investment income over the years, the final sale could result in an overall loss. It’s critical to subtract all of your expenses before arriving at a capital gains figure.
  • Know When to Pay: One of the capital gains caveats involves deferment. If you receive a capital gain from a divorced spouse or deceased parent, the taxable amount does not necessarily come due that year. The new owner of an asset incurs the tax liability when they sell it and earn a profit. It’s important to keep in mind that the profit will be calculated based on the value when your ex-spouse or parent purchased the asset.
  • Lifetime Exemption: Certain small business owners may be eligible for the Lifetime Capital Gains Exemption when selling farms, fishery property, and qualifying private interests. Canada’s lifetime exemption proves complicated, and it’s advisable to consult with a tax professional.  

An experienced advisor can help you minimize their tax liability by spreading the profits over years. This strategy, often called a capital gain reserve, does more than simply postpone payment. A capital gain reserve can reduce the amount you pay.

What Is a Capital Gains Reserve?

A capital gains reserve effectively reduces the amount of profit you enjoyed as income in a given year. After calculating your capital gain, everyday people can lower that figure on the income by claiming a reserve amount. Taxpayers can usually spread the total revenue over five years using a specific formula.

In cases involving family farms, fishing businesses, among others, a qualifying capital gains reserve may be extended for upwards of 10 years. This type of deferment helps prevent the gain from driving you into a higher tax bracket and unnecessarily giving more of your hard-earned money to the government.  

While Canadians all need to pay their fair share of taxes, it’s equally important to ensure the best financial stability for you and your business.

Want to know more about the difference between capital gains and investment income? Contact Avisar Chartered Professional Accountants and schedule a consultation today. 

Avisar is a highly-regarded accounting firm operating in Langley, Abbotsford, Surrey, Vancouver, and the rest of the Lower Mainland.


Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Person using a calculator at a desk with a spreadsheet and credit cards.

5 financial mistakes to avoid when you’re young

As a fresh graduate, saving for the future can be hard to envision. But being money-wise in these earlier years can have exponential pay-offs in your later years. 

According to experts, avoiding several spending traps when you’re early in your career can help set you up for a more stable financial future.

Accumulating credit card debt

Spending within your means may seem obvious, but when you’re fresh out of school and looking for a job, this can be challenging.   

“I think a lot of young people, even in university, don’t really have steady employment and end up spending more than they would have spent in cash,” says CPA David Trahair, a personal finance expert and author of CPA Canada’s free practical guide, Survive and thrive: Move ahead financially after losing your job.   

Credit cards in and of themselves aren’t bad – in fact they’re a helpful way to establish a credit history – but it’s important to understand what you’re signing up for. High-interest rate cards can accumulate debt quickly, if you’re not paying down the balance each month, Trahair says. Spending only what you can afford – or only what you must, where possible – can set people up for better financial health, since they are actively trying to keep balances low. 

If you do find yourself in a position where you need to take on debt, try to use a lower interest rate, point-free card. “The benefit of the points rewards is often less than one per cent a year,” says Trahair. “It doesn’t make sense to carry a balance when the credit card rate is as high as 20 per cent or more.” 

Another option is to obtain an unsecured line of credit, he says, to avoid high-interest rate credit cards. However, without having previous past credit to build up a good credit score, a parent may have to guarantee the credit card or loan to qualify the candidate.

Investing before paying off debt

While the idea of saving and growing money is attractive, investing money only makes sense if your credit card debt is paid down, says Trahair. 

“When you’re in credit card debt, the company is charging you interest,” he says. “To save, you’re taking money that would otherwise be spent to pay down that credit card.” With companies charging between 20 to 24 per cent interest, credit card debt quickly accumulates.

“People like the idea that they have savings,” says Trahair. “They’ll say, ‘So I owe $10,000, but I have $2,000 of savings.’ They’re in worse shape than the person that only has $8,000 on that credit card [because of the accumulating interest]. The best investment is paying down that credit card debt.”

Delaying life insurance investments

Often when you’re young, obtaining a life insurance policy isn’t top of mind – but it should be, says CPA Garth Sheriff, who runs CPD consulting firm Sheriff Consulting.

“Theoretically, it’s when you’re the healthiest,” he says. “You’re more likely to get a lower premium plan and, if you get something that you can lock into, it can also be a savings return vehicle. It’s not only a safety net, but it also builds equity.”

Plans such as universal life insurance and whole life, he says, work like investment policy funds that have a cash surrender value – meaning you don’t just acquire funds in death, but the cash value builds up as savings. Each plan has its own risk tier, so be sure to research the appropriate plan and available options, he says. 

Not setting an end goal

Understanding why you are trying to save money leads to a more successful outcome, says Trahair. While this goal may be different for everyone, ultimately, each person has a life target they want to meet, whether it’s buying a home or planning for retirement.

“The best thing you could do for your personal finances is track where your money’s going,” he says. Trahair recommends using free budgeting apps or those available through banking services to help identify spending habits. 

Budgeting, he says, requires historical information. But, if you’re just graduating or starting out on your own, you won’t have this data. If you track your spending even for just one month, you’ll reveal a strong financial picture, as most people tend to have the same habits (save for the odd month where there may be a big-ticket item purchase or vacation, etc.), he says. 

Reducing the number of spending sources is also advised. “If you have three or four bank accounts and three or four credit cards, this exercise is going to be very difficult,” he adds.

Living paycheque to paycheque

This is the least desirable scenario for anyone. Sheriff recommends striving for six months to a years’ worth of funds if possible – and start that saving habit when you’re young. Having a financial safety net has the added benefit of improving your borrowing power in the future. 

“That early time in your life, as you’re building your credit history and your ability to borrow, is really important,” he says. “Even if you don’t know what your plan is.”   

Whether you’re saving for an additional designation or taking a year off, Sheriff says being prepared for the unexpected can help you remain in good financial standing and possibly avoid additional stress and debt, adding, “You never know what life is going to throw at you.”