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Practical Financial Solutions — Retire yourself, but not your business

Roger Higgins
By Roger Higgins
October 5th, 2015

You’ve built a thriving business over the years – now you’re ready to retire and you want your business to thrive without your daily guidance.

The solution is effective succession planning – and one of the most important components of your plan should be reducing the tax burden on you and your successor(s) by maximizing the after-tax value of your business.

Retirement is a “normal” transition but your succession plan should also identify appropriate exit strategies for other eventualities such as a “forced” transition due to unexpected events from physical or mental incapacity to death.

If your succession plan doesn’t encompass all the possible exit eventualities, your successors could face an unexpected, potentially unaffordable tax bill.

Here are other succession plan strategies to consider:

Identify your replacement(s)

Your successor could be a family member or someone else. Either way, you’ll need to consider their personal tax and financial situation.

Confirm your assets and liabilities

Include both family and business-related assets and all other investments that affect your overall tax situation and liquidity. Lack of liquidity during your succession can lead to business failure because tax bills can’t be paid. Insurance can be a good way to bridge this gap.

Identify your tax reduction options

Choose from these strategies:

  • Capital gains exemption You and your stakeholders may be able to benefit from the 
$813,600(2015 limit) lifetime capital gains exemption on qualified small business shares. 

  •  Spousal trust This type of trust can ensure your beneficiaries are protected, while also deferring the capital gains tax on the asset held in trust until the death of the surviving spouse. 

  • Freeze company value This provides an income-splitting opportunity and the ability to defer any increase in your tax liability. 

  •  Transfer ownership over time Sell the business to family members or other buyers over an extended period to spread the tax bill over a longer period and ease the cash flow pressure. 

Confirm your succession “readiness”

Get your wills, contracts and other paper work in order and be sure it’s all readily available. Revisit your succession plan frequently to account for changing business and family/stakeholder circumstance and revise your tax strategies accordingly.

Identify your succession support

You built your business but you don’t have to – and probably shouldn’t – plan its succession all by yourself. Your professional advisor can help you avoid a succession tax crunch and help you plan all the other aspects of your financial life, both business and personal. 

This column is sponsored by Roger Higgins, a BA, CFP Division Director for Investors Group in the Kootenays. For all your financial planning needs, contact Roger at 250-352-7777 of email at


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