A short advisory talk (YouTube video) by Bob Gauvreau on proactive tax planning for intergenerational business transfers. It explains risks of poor planning (e.g., loss of capital gains exemption when corporate cash exceeds thresholds), and recommends using holding companies and family trusts to access multiple lifetime capital gains exemptions and minimize taxes, protect assets, and ensure a smooth succession.
Chapters
Okay, so you're looking at transferring your business to the next generation. Either it's going to happen while you're alive, or if it's an inheritance, when you pass away. Things can be a little bit more challenging if it's not properly planned for. So regardless, you want to make sure that one transfer from you to the person who's going to inherit the business, whether it's now or whether it's later on. How do we do it properly? There's some key tax planning opportunities that will allow us to essentially in most instances, transfer this business from one generation to the next with limited to no tax consequences. And we can do it, but we don't want to be dealing with it after something negative has happened. If someone passed away, it's really hard to get signatures saying that documents were signed prior to death. So what we want to do is we want to proactively plan any sort of succession plan because there's circumstances on that transition that could have again, some pretty negative tax consequences. And here's one example. So if we have $1 million business, and I have more than $100,000 of cash inside my business, I would not be eligible for my capital gains exemption. And that would cost me about $250,000 in tax on that disposition. So just because I have $100,000 in cash, it would cost me $250,000 in taxes. That is not a smooth transition. Negative tax consequences. Now on the other hand, if we were to do a more sophisticated tax plan, what we could do is we could eliminate the $100,000, move it into a holding company, better protect it, regardless, likely even introduce a family trust. So if we were to introduce the family trust early on, we, what we can do is get access to multiple beneficiaries, lifetime capital gains exemptions. This means that everyone gets around a million dollars of tax free money. We can actually introduce it to all of your beneficiaries, spouse, kids, cousins, aunts, uncles, parents, whatever, whoever you want in there as your beneficiaries. You have to be careful who we include because it could have negative tax consequences if they're also business owners. But we can introduce them. And essentially for every beneficiary, you sell your business for a lot of money. It would save you a quarter million dollars per beneficiary by having this in place early. So the question is, how do we transition to the next generation or to someone who's inheriting the business? We proactively do it with great tax planning experts involved, like our team. We come up with a sophisticated plan. We minimize your tax exposure, we better protect your assets, and we guarantee a successful and smooth transition from one generation to the next.
