Tax-Efficient Strategies

Business Transition Planning

As an entrepreneur, it’s hard to think about leaving your business. You’ve poured your heart and soul into it for many years. As a result, planning for a transition is often put off for later.

Our team has worked on business transitions and planning with many companies in different stages of growth and development. We have seen and helped business owners and executives successfully navigate their company’s evolution. Whether you want to grow your business through acquisition, realize capital by divesting all or a portion of the business or are thinking of selling your share of the business to pursue the next stage of your life or career, our team can help.

We understand that running a successful company doesn’t leave you a lot of time to develop a succession plan or exit strategy. We can help you create a cohesive plan to transition your business to new owners or realize the maximum value of its assets.

It’s never too early to think about your succession plan or exit strategy. Proper business transition planning may allow you to:

• Maximize the value of the business upon sale
• Reduce the risk of loss to your retirement and/or estate capital
• Take advantage of tax-planning opportunities by coordinating your business and estate planning
• Create a smooth, secure transition that helps ensure the ongoing success and continued good reputation of your business under new leadership
• Develop future plans regarding the ownership of your business

We unite a team of financial professionals with the expertise to offer strategies that help optimize your business and personal wealth.

1. Personal Insured Retirement Strategy

A personal insured retirement strategy is designed to maximize retirement income for individuals concerned about taxes reducing their savings. This approach uses a life insurance policy that accumulates cash value. Upon retirement, you can access the policy’s cash value to supplement your retirement income in a tax-efficient manner.

• Maximizes after-tax retirement income
• Provides flexibility and supplemental cash flow
• Helps mitigate the impact of taxes on retirement savings

2. Insured Annuity Strategy

The insured annuity strategy offers a low-risk, tax-efficient solution for individuals worried about low fixed-income returns. This approach combines an annuity with permanent life insurance:

• The annuity provides tax-efficient, lifetime cash flow.
• The life insurance policy returns the original invested capital tax-free to beneficiaries.

Ideal For: Individuals aged 65 to 80 seeking to maximize retirement income and preserve capital.

• Guaranteed lifetime income stream
• Tax-free capital preservation for beneficiaries

3. Immediate Finance Arrangement (IFA)

An Immediate Finance Arrangement (IFA) allows an individual or corporation to purchase an exempt life insurance policy and deposit additional funds beyond the required premiums. The policy is then used as collateral to secure a loan for alternative investment purposes.

Important: Consult with a tax professional to structure this arrangement effectively.

• Access to alternative investment opportunities
• Tax-advantaged growth within the policy
• Potential for increased overall wealth

4. Corporate Estate Preservation Strategy

A corporate estate preservation strategy enables business owners to preserve capital and enhance estate value using life insurance. By allocating a portion of your business’s passive corporate assets to fund a life insurance policy, you benefit from tax-deferred growth.

Best For: Shareholders of private corporations with surplus capital not needed for business operations.

• Tax-efficient growth of corporate surplus
• Cost-effective distribution of corporate assets to shareholders

5. Corporate Insured Retirement Strategy

A corporate insured retirement strategy allows a key person or shareholder to use a life insurance policy as collateral, providing access to additional retirement income while preserving the business’s capital.

• Enhances retirement income for business owners
• Maintains business stability

6. Buy-Sell Agreement

A buy-sell agreement is a vital part of a shareholders’ agreement. It outlines how each partner’s shares will be purchased or redeemed in the event of death or disability, typically funded by life and disability insurance.

• Ensures smooth ownership transitions
• Protects the business’s financial health
• Provides security for partners and their dependents

7. Key Person Insurance

Key person insurance protects businesses from financial loss due to the death or illness of a key employee. This corporate life insurance strategy compensates the company for lost profits, increased expenses, or cash flow disruptions.

• Protects business continuity
• Mitigates financial risks associated with key employees

A personal insured retirement strategy is used to maximize retirement income for individuals who are concerned about taxes reducing their income. Upon retirement, an individual can access the policy’s cash value to supplement their retirement income.

 

The insured annuity strategy provides a low-risk, tax-efficient solution if individuals are concerned about low fixed income returns. This strategy is a combination of an annuity and permanent life insurance. The annuity provides tax-efficient cash flow for life. The life insurance policy returns the original invested capital tax-free to beneficiaries.

This strategy is ideal for individuals between the ages of 65 and 80 who want to maximize their retirement income and preserve capital.

 

An Immediate Finance Arrangement (IFA) is an arrangement in which an individual or corporation purchases an exempt life insurance policy and deposits money into the policy in excess of what is needed to fund the insurance and policy charges. The policy is then used as collateral to secure a loan for alternative investment purposes.  Professional advice from your tax professional is required to determine the best way to structure this arrangement.

 

A corporate estate preservation strategy provides business owners with a cost-effective way of preserving capital and enhancing the value of their estate. By using a portion of your business’ passive corporate assets to fund a life insurance policy, you can take advantage of tax-deferred growth within the life insurance policy.

This strategy is best used for shareholders of a private corporation with surplus capital not required to operate the business.  The corporation is looking to grow their corporate surplus in a tax-efficient environment, as well as seeking a cost-effective strategy to distribute the corporation’s locked-in surplus to shareholders.

 

A corporate insured retirement strategy allows a key person or shareholder in a business to utilize a life insurance policy as collateral.

 

A buy-sell agreement is part of a shareholders’ agreement between business partners. The agreement sets out how each partner`s shares will be purchased or redeemed upon their death or disability. This purchase is typically funded by life and disability insurance on the partners. It ensures a smooth transition and ready market for the shares without jeopardizing the business’s financial health, the disabled partner, or a deceased’s dependents.

 

Key person insurance is a corporate policy used to protect businesses from decreased profits or additional costs associated with a key employee`s death or illness. This life insurance strategy is typically used to compensate a corporation for expenses, lost sales or other cash flow changes that arise on the loss of an important employee.