When I initially started putting together the Estate Planning for Business Owners Checklist, I thought, this will be straightforward- we need to have something that addresses the personal and business assets of business owner and then I realized; “Nope that’s not going to work.” Why? Because for business owners, it’s more complicated since it needs to deal with:

  • Complex business and personal relationships
  • Bigger and more intricate estates
  • Tax issues
  • Business Succession

Therefore with this piece, we’re only going to handle estate planning for business owners and then we’ll look at Business Succession Planning in a separate piece.  I would like to emphasize that an estate plan and succession plan are different. An estate plan deals with your personal and business assets and is triggered by death. A succession plan deals with your business assets only and can take place while you’re alive (such as during your retirement) or on death. Another point is, that you need to have an estate plan regardless if you have a succession plan or not.

I’ve structured the infographic checklist the same way as I did with the “Estate Planning for Mature Families and Retirees”, a two sided hexagon; Questions side and Tools side with each side complementing each other.

Adult Children

Question Side:

  • Fair vs Equal (also known as Equitable vs Equal) – like what’s considered to be fair may not necessarily be equal. ex. Should the daughter that’s been working in the family business for 10 years receive the same shares as the son who hasn’t worked in the family business at all?
  • Are the adult children responsible enough to handle the inheritance? Or would they spend it all?
  • Who works in the family business? Is it all the kids or just one of them?

Tools Side:

  • Encourage open conversation with parents and kids so context can be provided behind the decisions, there are no surprises and allows the kids to express their interests and concerns.
  • Facilitate a family meeting with both generations, this will help promote ongoing family unity after death and decrease the chances of resentment later.
  • Start looking at considerations for a succession plan for the business. (This needs to be documented separately.)

Assets/Liabilities

Question Side:

  • What are your assets? Create a detailed list of your assets such as:
  • Home, Real Estate, Investments- Non registered, TFSA, RRSP, RDSP, RESP, Company Pension Plan, Insurance Policy, Property, Additional revenue sources, etc…
  • What about shares in your business? How does this need to be addressed?
  • What are your liabilities? Create a detailed list of your liabilities such as:
  • Mortgage, Loans (personal, student, car), Line of Credit, Credit card, Other loans (payday, store credit card, utility etc.)
  • Did you personally guarantee any business loans and how does this need to be addressed?
  • Understand your assets-the ownership type (joint, tenants in common, sole etc.), list who are the beneficiaries are for your assets
  • Understand your liabilities- are there any cosigners?

Tools Side:

  • Will- Have one.
  • Assign an executor.
  • Provide specific instructions for distribution of all assets.
  • Consider a power of attorney for use when you’re incapacitated or otherwise unable to handle your affairs.
  • Always choose 2 qualified people for each position and communicate with them.

Taxes and Probate

Question Side:

  • How much are probate and taxes? (Income tax earned from Jan 1 to date of death + Taxes on Non Registered Assets + Taxes on Registered Assets, Taxes on Business Shares)
  • Are there any outstanding debts to be paid?
  • You’ve worked your whole life- how much of your hard earned money do you want to give to CRA?
  • How much money do you want to to give to your kids while you’re living?

Tools Side:

  • Consider the use of trusts.
  • Consider the use of an estate freeze if you wish to gift while you’re living.
  • Consider the use of a holdco for effective tax planning.
  • Once you determine the amount of taxes, probate, debt, final expenses and gifts required, review your life insurance coverage to see if it meets your needs or if there’s a shortfall.

Execution:It’s good to go through this but you gotta get it done. Besides doing it yourself, here’s a list of the individuals that can help:

  • Financial Planner/Advisor (CFP)
  • Estate Planning Specialist
  • Insurance Specialist
  • Lawyer
  • Accountant/Tax Specialist
  • Chartered Life Underwriter (CLU)
  • Chartered Executor Advisor (CEA)

There are definitely unique situations in many families and things can get complicated so please use this when you feel it’s applicable.

If you’re a subscriber advisor of ours, please let us know if you’d like this infographic checklist to use with your family clients, prospects and referral sources such as accountants, estate planning lawyers and estate professionals.

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