Smart Succession Is Possible! The Protectors Group Can Help

Kawartha Family Business Group3 March 2008

Smart Succession Is Possible!Smart Succession Is Possible!The Protectors Group Can The Protectors Group Can HelpHelp

Smart Succession Is Possible!Smart Succession Is Possible!The Protectors Group Can The Protectors Group Can HelpHelp

► The GuideThe Guide Help Clarify ObjectivesHelp Clarify Objectives Help Organize ResourcesHelp Organize Resources Find Efficient Methods To Match Resources To GoalsFind Efficient Methods To Match Resources To Goals

► The MotivatorThe Motivator Sales People Help People Make DecisionsSales People Help People Make Decisions Sales People Are PersistentSales People Are Persistent

► The CoordinatorThe Coordinator Familiar With The Roles Of The Professionals Familiar With The Roles Of The Professionals

InvolvedInvolved Know Where The Overlaps And Conflicts Will AriseKnow Where The Overlaps And Conflicts Will Arise

► The CommunicatorThe Communicator ObjectiveObjective Skilled At Reporting, Speaking, PresentingSkilled At Reporting, Speaking, Presenting Simple And DirectSimple And Direct


Contact Us For A Confidential Contact Us For A Confidential Discussion About The Discussion About The

PossibilitiesPossibilities

Terry WindremTerry WindremThe Protectors GroupThe Protectors Group

215 George Street North215 George Street NorthPeterborough, Ontario, K9J 3G7Peterborough, Ontario, K9J 3G7

705-748-5181 X218705-748-5181 [email protected]@protectorsgroup.com

Don ShaughnessyDon ShaughnessyThe Protectors GroupThe Protectors Group

215 George Street North215 George Street NorthPeterborough, Ontario, K9J 3G7Peterborough, Ontario, K9J 3G7

705-748-5181 X225705-748-5181 [email protected]@protectorsgroup.com

Smart SuccessionSmart Succession

MattersMatters


NoticeNotice

► Not everything applies to everyoneNot everything applies to everyone► The material is intended to provide a basis The material is intended to provide a basis

for discussion with professional advisors for discussion with professional advisors familiar with your particular situation.familiar with your particular situation.

► The material presented is a tiny fraction of The material presented is a tiny fraction of what is importantwhat is important

► This material is not, and should not be This material is not, and should not be treated as legal, accounting, tax or treated as legal, accounting, tax or business advice.business advice.

► Smart Succession is not restricted to Smart Succession is not restricted to family transition only. It can also apply to family transition only. It can also apply to a sale to employees or even to unrelated a sale to employees or even to unrelated 33rdrd parties parties


Smart Succession MattersSmart Succession Matters► To YouTo You► To Your SpouseTo Your Spouse► To Children Who Own The To Children Who Own The

BusinessBusiness► To Your Other ChildrenTo Your Other Children► To EmployeesTo Employees► To CustomersTo Customers► To SuppliersTo Suppliers► To The CommunityTo The Community► To CharitiesTo Charities► To The GovernmentTo The Government


9 Elements Of9 Elements OfSmart Succession (In Order)Smart Succession (In Order)

1.1. Mom & Dad Have All The Money They NeedMom & Dad Have All The Money They Need2.2. Children Can Run The Business Successfully Children Can Run The Business Successfully 3.3. Business Has Capital To Grow And ProsperBusiness Has Capital To Grow And Prosper4.4. Children Live Longer Than Their ParentsChildren Live Longer Than Their Parents5.5. In-laws Are No ProblemIn-laws Are No Problem6.6. No Unforeseen Cash Drain ArisesNo Unforeseen Cash Drain Arises7.7. All The Paperwork Is Valid And CompleteAll The Paperwork Is Valid And Complete8.8. The Estate Has Enough Liquidity The Estate Has Enough Liquidity 9.9. Estate Provides Equitable Shares For AllEstate Provides Equitable Shares For All


Smart SuccessionSmart SuccessionIs Tough StuffIs Tough Stuff

► Some Elements ConflictSome Elements Conflict Cannot Invest & Spend The Same DollarCannot Invest & Spend The Same Dollar

► Some Elements Are Not ControllableSome Elements Are Not Controllable Health, Time Of Death, Order of Death, EconomyHealth, Time Of Death, Order of Death, Economy

► Some Things You Some Things You KnowKnow Will Change Will Change Spending, Interest Yields, Maybe Taxes & FeesSpending, Interest Yields, Maybe Taxes & Fees

► Some Things Are Hard To Fix Later Some Things Are Hard To Fix Later Freeze & ThawFreeze & Thaw

► Some Possible Events Are Some Possible Events Are CatastrophicCatastrophic Successor Child Dies FirstSuccessor Child Dies First


Planning HelpsPlanning Helps

► Minimize The Effect Of Conflicting GoalsMinimize The Effect Of Conflicting Goals► Discover Previously Unforeseen Discover Previously Unforeseen

OpportunitiesOpportunities Reduce Income Taxes, Estate Costs Reduce Income Taxes, Estate Costs Efficient Capital Provides Efficient IncomeEfficient Capital Provides Efficient Income

► Provide FlexibilityProvide Flexibility Including for catastrophesIncluding for catastrophes

► Provide A Creditor Proof StructureProvide A Creditor Proof Structure► Use Redundant Capital EffectivelyUse Redundant Capital Effectively

Reposition Seasonal Cash FlowReposition Seasonal Cash Flow Invest For Better YieldInvest For Better Yield

► Use Leverage EffectivelyUse Leverage Effectively Borrow For The PeaksBorrow For The Peaks Use Back To Back Loan StructureUse Back To Back Loan Structure


What We DoWhat We Do

► Clarify ObjectivesClarify Objectives Retirement Cash FlowRetirement Cash Flow

SecuritySecurity Children SucceedChildren Succeed Equitable EstateEquitable Estate

► Organize ResourcesOrganize Resources► Relate Your Situation to “THE SYSTEM”Relate Your Situation to “THE SYSTEM”

► Find Efficient Ways To Join Your Find Efficient Ways To Join Your Resources, The System And Your Resources, The System And Your

ObjectivesObjectives► Integrate Your Plan With Successors’Integrate Your Plan With Successors’► Co-ordinate With Other ProfessionalsCo-ordinate With Other Professionals

► CommunicateCommunicate► Review & Follow-upReview & Follow-up


Some Planning AreasSome Planning Areas

► Efficient and Safe IncomeEfficient and Safe Income► Minimize Capital Commitment To Get Minimize Capital Commitment To Get

The Retirement Cash Flow AnswerThe Retirement Cash Flow Answer► Shed Catastrophic RiskShed Catastrophic Risk► Use The Income Tax Act To Use The Income Tax Act To

AdvantageAdvantage► Good Money, Bad Money IssuesGood Money, Bad Money Issues► Compartmentalize Problems And Compartmentalize Problems And

Solutions When PossibleSolutions When Possible


Some Obvious PlansSome Obvious Plans

►Use Efficient Ways To Get Use Efficient Ways To Get Spending Money & Make It Spending Money & Make It Independent OfIndependent Of Business Business SuccessSuccess IPP, RCA, RRSP, Holding CompanyIPP, RCA, RRSP, Holding Company

►Minimize The Tax DragMinimize The Tax Drag Corporation Pays First or Maybe No One PaysCorporation Pays First or Maybe No One Pays


Avoid Systemic Costs Where Avoid Systemic Costs Where PossiblePossible

►Example - Tax Clawbacks Example - Tax Clawbacks For someone 65 or older, the government For someone 65 or older, the government

claws back various benefits and exemptions claws back various benefits and exemptions based on income. By $65,000 they have taken based on income. By $65,000 they have taken back 9.back 9.

The 10The 10thth Is The OAS Clawback Is The OAS Clawback► From income of $65,000 to about $110,000 From income of $65,000 to about $110,000

you lose an extra 8.5% to the government. you lose an extra 8.5% to the government. More like 13% of cash dividends but only to More like 13% of cash dividends but only to about $90,000about $90,000


Notice That Income And Cash Notice That Income And Cash Flow Are Not The Same Thing. Flow Are Not The Same Thing.

►You Spend Cash Not IncomeYou Spend Cash Not Income Drawing Down A Shareholder Loan By $20,000 Drawing Down A Shareholder Loan By $20,000

Per Year After 65 Gets The Same Answer As Per Year After 65 Gets The Same Answer As Taking $45,000 From An RRSPTaking $45,000 From An RRSP

Drawing Down An RRSP Before 65 Sometimes Drawing Down An RRSP Before 65 Sometimes Is Better Than Leaving ItIs Better Than Leaving It


Know The RulesKnow The RulesCPP Systemic CostCPP Systemic Cost

You Are 59 Now And Have Contributed You Are 59 Now And Have Contributed At Maximum for 42 years. At Maximum for 42 years. (More complex for females with children)(More complex for females with children) Paying $4,000 Each Year From Now To Age 65 Paying $4,000 Each Year From Now To Age 65

Will Increase Your CPP Monthly Benefit At Will Increase Your CPP Monthly Benefit At Retirement By:Retirement By:

Zero Dollars Per MonthZero Dollars Per Month► If You Are 60 And retired 6 years ago If You Are 60 And retired 6 years ago

you can have 70% of maximum now you can have 70% of maximum now or about 87% at 65. or about 87% at 65. Give up $40,000 for an extra $1,900 a year later Give up $40,000 for an extra $1,900 a year later

won’t breakeven in 20 years.won’t breakeven in 20 years.


Some Planning Is Not Some Planning Is Not ObviousObvious

► Secure Shareholder Loans & Pay InterestSecure Shareholder Loans & Pay Interest Interest does not attract EHTInterest does not attract EHT Protect Accumulated ValuesProtect Accumulated Values

► Have Your Corporation Pay For Whatever It Have Your Corporation Pay For Whatever It CanCan Including Non-deductible ExpensesIncluding Non-deductible Expenses

► Have Many Wills Have Many Wills For Example: Ontario Business Shares, Ontario General Assets, For Example: Ontario Business Shares, Ontario General Assets,

Possibly Wills For Several Other JurisdictionsPossibly Wills For Several Other Jurisdictions Avoid Probate CostsAvoid Probate Costs

► Leave Everything To Trusts Not To PeopleLeave Everything To Trusts Not To People► Use Current Income Taxes Payable To Use Current Income Taxes Payable To

Provide Estate Liquidity And Late-life Provide Estate Liquidity And Late-life Emergency CapitalEmergency Capital

► Uses Riskless Leverage To Reduce CostUses Riskless Leverage To Reduce Cost► Some EI cost are unnecessary, some WSIBSome EI cost are unnecessary, some WSIB


Start NowStart Now

►Get A Head StartGet A Head Start Some Things Take Time To MatureSome Things Take Time To Mature Henry Ford Started Planning His Estate On His Henry Ford Started Planning His Estate On His

Death Bed. 90 Days Is Not Long EnoughDeath Bed. 90 Days Is Not Long Enough

►But Be FlexibleBut Be Flexible Harold Ballard Started His Plan 20 Years Before Harold Ballard Started His Plan 20 Years Before

His Death. Unpleasantly, The Plan Only Lasted His Death. Unpleasantly, The Plan Only Lasted 11 Years. The Tax Cost To Fix It Was More 11 Years. The Tax Cost To Fix It Was More Than $15,000,000Than $15,000,000


Seek HelpSeek Help

► Each Profession Has Something To Each Profession Has Something To Contribute. None Can Deliver It All.Contribute. None Can Deliver It All.

► Professional Objectivity HelpsProfessional Objectivity Helps► Your Time Is Better Spent OtherwiseYour Time Is Better Spent Otherwise► You Need A You Need A

Guide/Motivator/Coordinator/CommunicatoGuide/Motivator/Coordinator/Communicatorr

► You Are Going To Do This Only Once So You Are Going To Do This Only Once So You Won’t Learn Much From ExperienceYou Won’t Learn Much From Experience

► If At First You Don’t SucceedIf At First You Don’t Succeed Don’t Build Your Own Succession PlanDon’t Build Your Own Succession Plan


Some Succession Plans FailSome Succession Plans Fail

►They get to be like the City’s They get to be like the City’s Official PlanOfficial Plan Meant to be filed not implementedMeant to be filed not implemented

►Biggest impediments to Biggest impediments to effective Implementationeffective Implementation People don’t know where to startPeople don’t know where to start Might force discussion of unpleasant factsMight force discussion of unpleasant facts It is not urgentIt is not urgent


A Good ObservationA Good Observation

The Urgent Is Seldom ImportantThe Urgent Is Seldom ImportantAndAnd

The Important is Seldom UrgentThe Important is Seldom Urgent

The Urgent Is Seldom ImportantThe Urgent Is Seldom ImportantAndAnd

The Important is Seldom UrgentThe Important is Seldom Urgent


Document and CommunicateDocument and Communicate

►WillsWills►Powers Of AttorneyPowers Of Attorney►Business AgreementsBusiness Agreements►Estate InventoryEstate Inventory►Succession Is Part Of AnSuccession Is Part Of An

Estate PlanEstate Plan►Family All Know The Plan AndFamily All Know The Plan And

Each Has A Part To PlayEach Has A Part To Play


We Can HelpWe Can Help► The GuideThe Guide

Help Clarify Help Clarify ObjectivesObjectives Help Organize ResourcesHelp Organize Resources

Find Efficient Methods To Match Resources To Find Efficient Methods To Match Resources To GoalsGoals

► The MotivatorThe Motivator Sales People Help People Make DecisionsSales People Help People Make Decisions

Sales People Are PersistentSales People Are Persistent

► The CoordinatorThe Coordinator Familiar With The Roles Of The Professionals Familiar With The Roles Of The Professionals

InvolvedInvolved Know Where The Overlaps And Conflicts Will Know Where The Overlaps And Conflicts Will

AriseArise

► The CommunicatorThe Communicator ObjectiveObjective

Skilled At Reporting, Speaking, PresentingSkilled At Reporting, Speaking, Presenting Simple And DirectSimple And Direct

Smart Succession Is Possible! The Protectors Group Can Help

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