Inter-Generational Business Ownership Transfer

We assist families in structuring ownership transfers from one generation to the next - all while protecting the economic interests of each family member.

The Situation

Our client, a very successful, 65 year-old, second-generation business owner wanted to transfer ownership of his operating business and other extensive investment assets to the younger generations of the family. He wanted to ensure that we minimized tax consequences, but even more importantly, maintained family harmony.

The Solution

We developed and implemented an 11-pronged strategy that covered everything from valuation of the business, to a financial security plan for our client, to a comprehensive tax strategy.

We started by assisting the family in reaching an agreement on value, and helped our client determine the net worth he’d require to maintain his lifestyle indefinitely. When we created the plan to transfer ownership of the business to one of his grandchildren, we also developed strategies to transfer control slowly according to specific milestones. We also identified and implemented estate freeze procedures to minimize taxes, engineered new wills for all adult family members and integrated those into the overall plan, acquired appropriate life insurance for various family members, created a plan to minimize probate fees, and established a trust for the client and for each member of the third generation and his/her children. Finally, we created a plan so that the client’s interest in the business would be slowly liquidated, using eligible dividends (at a favourable tax cost) and capital dividends (at no tax cost).

Result Highlights

• the executive he chose, one of his grandchildren, now has operating control, and will slowly acquire full control as the agreed milestones are met
• the executive’s siblings have already received significant value and are protected from business risks
• the client’s objectives for fairness, control, financial security and tax effectiveness were achieved
• the goal of family harmony was realized