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Blog Timely Transitions

December 01, 2022

Recently, we had the opportunity to work with a local business family. A couple in their 60’s built several successful companies, with their adult children now handling all the day-to-day operations. Although Mom and Dad had stepped away from the ‘day-to-day work’, they had not yet transitioned ownership or control to their children.

As we commonly see, Mom and Dad were unsure if they had accumulated enough wealth to support their retirement. They were also concerned with creditor protection when transferring the business to their children, and they were not ready to pass on 100% control of the business decisions.

In completing a freeze and corporate restructuring, we were able to address Mom and Dad’s control and creditor concerns, while capping the value of the business growing in their names. The transaction resulted in Mom and Dad acquiring a significant amount of preferred shares.

Mom and Dad lead a simple life, and there is enough value in their preferred shares to support their retirement three times over. Unfortunately, the delay in freezing their corporation means when the remaining preferred shares are eventually gifted to the children on death, the real winner will be CRA.

While we have capped the tax problem, had we been able to implement the strategy even 5 years ago, significantly more tax efficiencies could have been realized. Control and creditor concerns should not be a reason to delay a transition strategy, as these concerns can be incorporated into the solution. It’s never too soon to begin contemplating a client’s Business Exit Strategy.

Reach out to us if you have a client situation you’d like to discuss.

Three60 Wealth & Estate Solutions Inc. has been very beneficial to  our company. Among other things, they were instrumental in coordinating  the drafting of a shareholder’s agreement for our growing company. While  working with the lawyer, Three60 walked us through the process from  beginning to end; always there to make sure we understood the various  provisions within the agreement and to answer any of the many questions  we had. We consider Three60 Wealth & Estate Solutions a valuable  resource to our company. 

James Holoboff, Process Ecology Inc.