corporate estate planning

The Importance of a Professional Corporate Estate Plan

August 23, 2018 3:31 pm Published by



My neighbour used to pride himself on being handy when it came to working on his car. He would eschew the professionally trained auto mechanics and spend hours in his garage “fixing” his beloved BMW–until it caught on fire and burned up in the parking lot of Safeway. The point of this rather dramatic anecdote? Sometimes a little knowledge can be a dangerous thing. This applies to corporate estate plans.


A Cautionary Tale

Cathy’s husband, Bill, was an active business owner who ran his corporate operations and took care of the accounts. Bill moved his after-tax earnings to a holding company for investment purposes, which were doing well. While Cathy was kept abreast of the big picture when it came to the business, she wasn’t directly involved in the day to day operations and had no part in the holding company.


Bill passed away suddenly and, unfortunately, did not have a corporate estate plan in place. As a result, his shares in the company were held up for over a year in the probate process because Bill didn’t prepare a proper corporate estate plan.  Bill’s bank required probate documents before granting the executor (Cathy) access to the corporate assets.  There was no clear plan on who would become corporate officer, who could write corporate cheques, etc.  This left Cathy with a lot of financial frustration as many assets were ‘stuck’ in the corporate holdings.


Cathy then found out from her accountant and lawyer that, without a Will, some of the shares of the corporation will need to go to their 2 sons, and that this will trigger capital gain taxation.  Tax strategies otherwise available could not be executed in time, and that on evenutal withdrawal of funds in the future from the corproation, there will be taxable dividends to pay.  Therefore, some of Bill’s corporate assets will be subject to Double Tax!



The Importance of Having a Plan

As a result of Bill’s lack of estate planning, Cathy was faced with financial burdens: a lack of access to corporate funds, and poor tax planning on the transition of the corporate assets from Bill.  As a result, she experienced the misfortune of not only mourning the loss of her husband, but having to do so with the added stress and anxiety of dealing with a heavy financial burden, something that could have been averted if Bill had prepared a plan to move his money out before his passing.


Don’t Try This at Home

While there are now many cookie-cutter or “Do it Yourself” (DIY) Will products on the market, they are generally not optimized for people with a high net worth and corporate holdings. While some people pride themselves on taking care of their own finances, creating a Will is a much riskier DIY project than say, filing your own taxes. The reason is that if you make a mistake on your taxes, you’ll find out from the CRA when you get your assessment. Worst case scenario, you may have to pay a few penalties and the issue is generally resolved with relative ease. If you decided to use a DIY Will, you won’t know if you made an error. Your loved ones, however, will be left to deal with the burden of your oversights–burdens that are not easily resolved and can take up to 3 years to clear up.


The Professional Solution 

The best way to ensure your heirs and loved ones will be free from potentially treacherous financial burden is to consult your public practice accountant, estate lawyer and insurance broker. You’ll find that there are many strategies that will enable you to do many things a lot smarter and a lot faster when it comes to your corporate estate plan, giving you the peace of mind of knowing your loved ones will not have to deal with uncertainty or financial burden after you are gone.


A good time to take steps to ease the tax burden on your heirs is NOW. Talk to your financial team about the benefits of the following:


  • Shareholder agreements
  • Multiple Wills
  • Signing Authority on Corporate Bank Accounts
  • Estate Freezes
  • Corporately Held Life Insurance


Let MGF Advisory Help

Marco Faccone, CPA, CA, CFP has long specialized in the area of corporately held insurance and estate planning, advising and assisting shareholders with succession and wealth accumulation strategies. Marco has worked alongside estate lawyers and tax accountants to offer his clients a professionally tailored and value-added plan. Contact MGF Advisory for more information regarding corporately held insurance and succession planning.



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This post was written by Marco Faccone