Estate planning

You won't live forever, so save yourself and your family worry--and protect your wealth--by planning now

Written by Susanne Baillie

Many entrepreneurs treat succession and estate planning as if they’ll live forever. But preparing for your final farewell now can save you time, money and worry down the road.

Conscript your lawyer and accountant to help you prepare the following:

1. An estate plan

Include an up-to-date will and designate power of attorney. Remember that your spouse may or may not be the best decision-maker, especially when it comes to selling your business. Consider naming a “disaster team” with family, business and shareholder representatives.

2. Shareholders’ agreement

Such a contract governs what can happen to your shares should you become disabled, retire or die. Spending the money to develop an agreement now can save you an exponential stack of legal bills down the road, warns Doug Brown, managing director at Newport Partners Inc., a Toronto-based wealth-management firm.

3. Life insurance

A policy can reduce your tax liability and pay down taxes owing upon your death. “Make sure there are enough funds for your beneficiary to buy you out upon on your death or disability,” adds Barry Brownlow, a chartered accountant in Ancaster, Ont.

4. A tax plan

Develop tax strategies that resolve your estate on the least costly basis. For instance, an estate freeze can help you predict your tax liability upon death, allowing you to determine how much life insurance coverage to purchase today. (Because post-freeze growth goes to your beneficiaries, freeze only when you’ve accumulated enough money to retire on.)

5. A healthy business

In many ways, you are your business. So it has higher value when you’re alive than during a post-funeral fire sale. If you’re not going to sell it soon, says Brownlow, then strengthen your management team and leave more operations to them “so if you don’t make it home on that plane, invoices are still going to go out, customers are still satisfied and new products are still brought to the table.” Strong managers may even become buyers.

© 2004 Susanne Baillie

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