This document discusses succession planning for Company A and the family that owns it. It provides an overview of the company's balance sheet, which shows $25 million in total assets and $10 million in shareholder equity. It then discusses the family that owns the company, their roles, and ages. The rest of the document outlines various succession planning strategies and considerations, including completing an estate freeze to transfer ownership, setting up trusts, and other legal structures to facilitate a smooth transition of the business to future generations while minimizing tax liability.

2. Succession Planning
Assumption: Company A — Balance Sheet
ASSETS
Current assets 10,000,000$
Long-term assets 15,000,000
25,000,000$
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities
Current liabilities 6,000,000$
Long-term liabilities 9,000,000
15,000,000
Shareholder's' equity
Common shares 1,000
Retained earnings 9,999,000
10,000,000
25,000,000$
Book value of equity 10,000,000$
Fair value of equity 18,000,000$

3. Succession Planning
Family Assumptions
Bill (father) – sole owner 60
Mary (spouse) – part-time in business 56
Kim (active in business) 32
Todd (active in business) 30
Emily (not interested in business) 26
All (except Emily) remains employed in Company.

4. Where do I Start?
• Establish balance in your goals in business and personal
 Business – management, employment, succession, family participation
 Personal – need for funds, risk, estate, emotional
• Timing
• What is a business freeze?
 Assignment of 100% of current value into fixed value (preferred) shares and
re-issuing new common shares for future growth
 Available tool to facilitate discussion
• Establish a co-ordinated team

5. Estate Freeze
$18M in
common shares
BillBill
COMPANY
A
BEFORE
$18M in
Preferred shares
BillBill
COMPANY
A
Common –
nominal value
AFTER
?

6. Considerations in an Estate Freeze
• Valuation
• Receipt of new common or growth shares
• Terms and conditions of preferred shares
• Taxation
• Review of corporate documents/assets

7. Further benefits of an Estate freeze
• Multiply capital gains election
• Income splitting potential
• Removal of cash - financing
• Multiple freeze transactions

8. Potential Example
Common shares
BillBill
COMPANY
A
Mary, Kim,
Todd, Emily or
Family Trust
Mary, Kim,
Todd, Emily or
Family Trust
$18M
Preferred Shares
(Voting)
Common shares
► Capital Gains Exemption
► Voting Shares
► Family Trust
►Holding Companies

9. • WHAT ARE YOUR GOALS AND OBJECTIVES?
• IF WE DO A FREEZE, WILL THE VALUE OF THE FROZEN SHARES AND YOUR OTHER
ASSETS RESULT IN YOU HAVING THE AMOUNT OF MONEY YOU NEED TO
MAINTAIN THE LIFESTYLE YOU WANT?
• TRANSFER AGREEMENT
• SHAREHOLDERS’ AGREEMENT
• I AM CONCERNED I WILL GIVE MY SON/DAUGHTER SHARES, THEY WILL GET
DIVORCED AND THE FAMILY BUSINESS WILL BE LOST. WHAT CAN I DO?
Key Legal Considerations

10. “Its not the gift, it’s how you structure it”
other net
family
property 100
100value of
Shares
0
400
1,000
Son
Marital
BreakdownMarriage
Gift
other net
family
property
50
500
Marriage
What is the equalization payment?
Wife
Marital
Breakdown

11. “Its not the gift, it’s how you structure it”
other net
family
property
100
0
value of
Shares
400
800
Son
Marital
Breakdown
Gift
Marriage
other net
family
property
50 500
Marriage
What is the equalization payment?
Wife
Marital
Breakdown

12. • YOU MUST START WITH YOUR OBJECTIVES
• RETIREMENT, DISABILITY AND DEATH
 WILL YOUR PLANS BE THE SAME FOR ALL?
• FOR RETIREMENT, ESTATE FREEZE STRUCTURE COULD BE THE MAJOR FACTOR IN
DETERMINING YOUR INCOME AND PAYMENTS OVER TIME
 THE EMPLOYMENT AGREEMENT
 TRANSFER AGREEMENT
 SHAREHOLDER AGREEMENT
Succession Planning

13. • POWER OF ATTORNEY
 CAN LIMIT THE SCOPE TO DEAL WITH BUSINESS
For Disability
 WHO YOUR DECISION MAKER IS WILL BE CRITICAL
 CLEAR DIRECTION TO ATTORNEY AS TO INTENTIONS

14. • WILLS MUST BE IN PLACE
• DUAL WILLS
 ONE FOR BUSINESS SHARES
 ONE FOR OTHER ASSETS
• FAMILY TRUSTS ALSO HAVE TO BE CONSIDERED
For Death
• EXECUTORS ARE KEY ELEMENT
• CLEAR PLAN FOR BUSINESS SHOULD BE SET OUT

15. Succession Planning - The Financial Plan
Appropriate income tax and estate planning advice can help in validly
minimizing or deferring income tax that may arise on ownership succession
Our subjects:
Bill Age 60
Mary Age 56
Children:
Kim (32);
Todd (30);
Emily (26).

16. Succession Planning - The Financial Plan – Step 1

17. Succession Planning - The Financial Plan – Step 2

18. Succession Planning - The Financial Plan – Step 3

19. Succession Planning - The Financial Plan – Step 4

20. Succession Planning - The Financial Plan – Step 5

21. Succession Planning - The Financial Plan – Step 6

22. Succession Planning - The Financial Plan – Step 7

23. Succession Planning - The Financial Plan – Outcomes
Possible Solutions:
• Reduce taxes by transferring capital losses;
• Boost an RRSP with a retiring allowance;
• Reduce US Estate Tax exposure with a Non-Recourse Mortgage or other solution;
• Select the correct pension plan ~ consider an Individual Pension Plan (IPP);
• Assess income splitting opportunities with Spousal Loans, Family Trusts;
• Implement Charitable Gift strategically to reduce taxation and create a legacy;
• Reduce taxes by re-structuring debt;
• Testamentary Trusts and Alter Ego Trusts;
• Insurance to equalize estate gifts or pay taxes;
• Investment allocation suggestions to achieve retirement goals.

24. Succession Planning - The Financial Plan – US Estate Tax

25. Succession Planning - The Financial Plan Reveals
Appropriate income tax and estate planning advice can help in validly
minimizing or deferring income tax that may arise on ownership succession
Plan Outcomes and Goals:
•Bill and Mary have significant non-RRSP assets;
•Prefer security of guaranteed investment income;
•Will be looking for enhanced after-tax cash flow at retirement;
•Capital generated cash flow not needed to fund lifestyle requirements;
•Wants to generate more income with less tax at death and through
annual erosion;
•Wants to leave as much estate to beneficiaries as possible;
•Risk averse

26. Succession Planning – HoldCo Insurance Planning

27. Succession Planning – HoldCo Insurance Planning

28. Succession Planning – HoldCo Insurance Planning

29. Succession Planning – HoldCo Insurance Planning

30. Succession Planning - Resources

31. Warren Granger
Partner
Ernst & Young
T: 519-646-5534
F: 519-438-5785
warren.h.granger@ca.ey.com
Ian D. Shewan
Partner
Lerners LLP
T: 519-640-6334
F: 519-932-3334
ishewan@lerners.ca
Graham C. Porter
Partner
Lerners LLP
T: 519-640-6388
F: 519-932-3388
gporter@lerners.ca
Chris Delaney
Vice-President, High Net Worth Planning Services
RBC Dominion Securities
T: 519-675-6902
F: 519-675-2020
chris.delaney@rbc.com
Contact Details