Legacy Planning For Business Owners

Legacy planning involves a plan for managing your total wealth while you are alive and arranging on how to distribute your estate later in life.

Some business owners have done estate freezes and purchased corporate owned life insurance. One idea is to pledge the estate benefit of your life insurance policy to charity. This can either lower your estate taxes or create a tax deduction today.

For example, real estate investments held inside a corporation can be exposed to 3 levels of taxation

  1. The estate tax on the capital gains on the shares you own in your company

  2. The tax on dividends to extract cash from the company to pay the estate tax

  3. The corporate tax on the sale of assets to generate the cash to pay the estate tax and the tax on the dividend


Triple taxation can be the biggest tax of your lifetime ranging anywhere from 40% to 60% of your companies value. Tax changes announced July 18, 2017 increased the minimum legacy tax from 27% to 40%. Therefore, it is important to re-address your estate planning with your trusted advisor. 

Today the cost of life insurance is the cheapest to protect your family and cover your estate taxes. Life Insurance is essentially pennies on the dollar and an important asset in one's financial portfolio. When a business owner purchases a life insurance policy, it is for the protection of their business and to provide money for their estate taxes.

Why not consider the charitable gift of life insurance? Why not leave a legacy to your favourite cause(s)? 
With continued success and once you have achieved financial independence, you could be in the position to donate your policy to charity. 

Those who have not done any estate planning this article is intended to give you an opportunity to plan for the unique legacy tax issues later in life.
 

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