Personal Tax Planning & Estate Planning

Estate Planning

Estate planning is critical to effectively preserve wealth and pass it on to the next generation. We think out of the box. Where engaged to develop an estate plan, we:

  • prepare a summary of the client’s major assets and liabilities, and evaluate the tax consequences involved in passing those assets to the next generation;
  • Understand the family dynamic;
  • review the client’s Will and determine the family’s personal wishes with respect to succession of assets;
  • determine whether there is a role for insurance;
  • develop an estate plan, which may involve an estate freeze, a gifting program, a family trust, and/or new Wills;
  • implement the estate plan, and coordinate any required legal and valuation work;
  • recommend revisions to Wills to enhance the effectiveness of the tax planning and lighten the tax burden on the estate and heirs;
  • make sure all aspects of the plan are coordinated; and
  • assist in family meetings to explain the overall estate plan.

Using software we have developed, we can model the estate plan and monitor it year by year, adjusting it for changing financial circumstances, changing family, financial, and personal objectives and changes in tax laws.

Business Succession Planning

Many entrepreneurs who have built successful companies are concerned about business succession as they get older. They often want to see the family business passed to the next generation, but believe this cannot be done without paying significant capital gains tax. We can reduce the tax with advance planning.

We assist with business succession planning by

  • meeting with the client to determine the facts and circumstances, reviewing the personal tax position of the owners and the circumstances surrounding the company, and estimating the company’s worth;
  • obtaining a valuation of the business;
  • developing a plan for transferring the family business to the next generation (which may involve an estate freeze, the use of trusts, and, where appropriate, working with life insurance professionals) or positioning the business for sale in a tax efficient manner; and
  • working closely with legal counsel to implement the plan and assist in any tax filings that may be required.

Once the plan is in place, we can monitor it year by year and adjust the plan for changing circumstances, personal objectives, and changing tax laws.

Family Trusts

We have a variety of techniques for setting up income-splitting arrangements using trusts. These include structures where investment income and capital gains are realized by family members who have little or no income, and multiplying access to the capital gains exemption.

A trust can have a variety of other uses such as asset protection, maintaining control over assets, income splitting, multiple capital gains exemptions and estate planning.

Shareholder Remuneration Strategies

Recent changes to corporate tax rates have changed the rules of thumb followed for decades on how to remunerate owner-managers. The ability to defer tax by leaving funds in a corporation, rather than take a bonus or a dividend is very enticing. Yet, this must be balanced against the cash needs of the family and other matters (such as making an RRSP contribution).

An overall evaluation of how to remunerate an owner-manager and family is complex and multi-dimensional. We take a broad approach, looking at multiple factors such as corporate and personal tax rates, bonuses v. dividends, AMT, income splitting, RRSP contributions, the capital gains exemption, etc.

Retirement Planning

We provide a financial planning service to enable people to determine their expected level of income and the related tax liability in retirement. We develop financial models based upon expected rates of return and can advise, in general terms, on investment strategies as well as on the use of life insurance.

For high net worth individuals, we may also consider certain non-resident strategies and retirement arrangements, which may include trust arrangements. We frequently advise on the tax consequences of retiring in the United States and other countries.

In carrying out this work, we typically consult with investment advisers and insurance representatives to assist us in numerical modelling.

This work is done on a fee-for-service basis.

Deceased Taxpayer Tax Fillings

The preparation of tax returns for a deceased taxpayer and trust returns for an estate are specialized services within the specialized field of tax. Numerous elections and tax-planning opportunities are available, and an experienced tax professional can bring about substantial tax savings. Having written or co-authored two books on these topics, we can truly claim to be experts in this field.

We handle all of the tax aspects of a deceased taxpayer filing and related tax matters for the estate, including

  • reviewing the tax position on death,
  • reviewing the will to determine the tax implications,
  • preparing the deceased taxpayer’s tax return,
  • analyzing tax-planning options to minimize the tax on the estate, the deceased, and the beneficiaries,
  • preparing valuations required for tax return filings,
  • advising on the optimal distribution of assets,
  • tax and estate planning for a surviving spouse or other beneficiaries,
  • preparing trust returns for the estate, and
  • resolving any issues raised by Canadian tax authorities.

We can also develop or review estate planning for the family.

Trust and Estate Taxation

The area of trusts and estates practice is a complex one, with many opportunities for tax planning. These opportunities include

  • minimizing tax through income splitting;
  • planning for deferral of capital gains;
  • minimizing taxes on death and to an estate through the use of special elections;
  • evaluating certain non-resident strategies to “export” the trust to a favourable tax jurisdiction;
  • tax planning for the division of the trust assets, either to beneficiaries or to other trusts, and
  • evaluating the trust’s capital gains tax position and developing a capital gains minimization strategy (which may include an estate-freeze type of reorganization).

We can also prepare or review tax returns that involve complex trust situations. Having authored two books on this subject, we are the professionals that other professionals often turn to in complex situations or just for a second opinion.

Tax and Divorce

Our firm helps clients with tax issues connected with separation and divorce. Some examples of the issues we address include:

  • whether separation and divorce payments are deductible;
  • how to divide property in a tax-effective way;
  • how to reorganize and separate companies in a corporate group and divide them between the parties;
  • maximizing the tax advantages if one party is or becomes non-resident; and
  • dealing with international assets

As well we review any proposed property division and assist with a valuation analysis. We are also very experienced in working with legal counsel on all aspects of negotiation and completion of legal agreements.

International Families

Certain international tax strategies can be effective for high net worth families, especially if they have non-resident members. However, to the uninitiated, the offshore world is complex, confusing, and fraught with difficulties. The Canadian tax legislation in the international area is extremely complicated. In addition, it can be difficult to find reliable people in foreign jurisdictions to assist with tax-planning structures.

Our extensive experience in implementing international structures, our contacts through the Society of Trust and Estate Practitioners (STEP), and our other connections uniquely qualify us to implement an international tax plan for an international family.

In advising high net worth clients, the scope for international tax planning very much depends on individual circumstances.

High Net Worth Families

We frequently develop tax-planning strategies for high net worth families. We attempt to minimize their current taxes and develop a long-term strategic tax plan that will minimize their taxes on and after retirement. In some cases, the plan may involve a non-resident aspect, an estate freeze, or the use of trusts. The plan may also focus on investment strategies, retirement plans, and creative uses of insurance.

Executive Compensation

We design and implement executive compensation programs. This entails advising on the optimal forms of compensation, taxable and non-taxable benefits, tax-effective retirement plans, stock option programs, and insurance and disability plans.

We have written extensively on stock options and share ownership programs, and can assist with tax-reporting issues.

We have also designed and implemented carried interest arrangements, where executives participate directly in certain businesses. Using these plans, executives can obtain capital gains tax treatment (taxed at half rates) instead of regular salary or bonuses. We often include family trusts within these plans to maximize the benefits of income splitting. Sometimes the capital gains exemption can be used within the plan to obtain tax-free capital gains.

Tax Planning for New Immigrants to Canada

Canada offers tax exemptions and incentives for new immigrants. We are experienced in advising new immigrants on how to take maximum advantage of these. We closely coordinate this tax planning with professional advisers in the immigrant’s country of origin.

Specifically, in tackling such an assignment we

  • review the immigrant’s assets, sources of income, and personal situation to determine the most appropriate tax planning;
  • prepare a memorandum indicating the recommended tax planning strategy, along with detailed steps for implementing the plan;
  • introduce other professionals in offshore jurisdictions, if necessary, to carry out the tax planning;
  • prepare all required Canadian filings, which may include Canadian personal income tax returns and special foreign reporting forms;
  • review the client’s overall estate planning objectives to make sure they are appropriate, and assist the client in designing new Canadian wills; and
  • assist in ongoing taxation issues, such as ways of receiving remuneration or a foreign inheritance.

Sometimes valuations are required in this type of work. If so, we can supply valuation reports in a format that is acceptable to Canadian tax authorities.

Executives Coming to Canada

Executives coming to Canada find the Canadian tax system confusing and complex, full of reporting forms, deadlines and paperwork. This combined with high tax rates can be challenging at best and demoralizing at worst.

We can assist in a variety of ways.

Prior to coming to Canada, we can do a preliminary assessment of the executive’s tax position. At the same time, we will address tax planning ideas and consider various planning strategies. These may include:

  • realizing income before arrival (such as exercising stock options);
  • triggering capital gains after arrival, since Canada offers new residents favourable capital gains tax treatment;

We can also advise on executive compensation and moving reimbursements as well as tax equalization policies. Through our international contacts, we can coordinate tax planning in the executive’s home country and assist with tax filings. We will prepare all required Canadian tax filings, and handle correspondence with the tax authorities.