While you run an active business, your exit strategy may be the last thing on your mind. But consider your strategy in advance to help put you on a path to a smooth transition into a well-funded retirement.
Financial plan – A financial plan is a critical component of a business succession plan and will determine if you have adequate resources to support your retirement lifestyle and highlight which, if any, additional retirement saving strategies – such as an individual pension plan – are required.
Estate freeze – An estate freeze using a family trust is a common business succession and income-splitting strategy that transfers some or all of the future growth of the business to the next generation, helping to minimize and defer tax. Ensure the estate freeze is flexible enough so you can possibly reverse it if necessary.
Shareholder’s agreement – A well-drafted shareholder’s agreement provides a framework for the smooth operation of a business and addresses business ownership issues when certain triggering events occur, such as death, disability, retirement or marriage breakdown.
Insurance – Appropriate disability and life insurance can help ensure that the business continues and your family is able to maintain its lifestyle in the event of disability or premature death. Insurance may also be a low-cost solution for funding taxes at death and funding buy/sell agreements.
Kirbey Lockart is an investment advisor with RBC Dominion Securities. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.
