The Case of the Small & Farm Business Owner
George & Linda
George & Linda Smith are in their early 50s, have two children who are in their early 20s, and own a successful local business. They enjoy their work, are not in a rush to retire, and hope to continue working until they are 65. George & Linda feel that they are close to meeting their retirement goals, but would like to discuss strategies to help them over the finish line.
Goals:
They are likely going to have assets trapped inside of their corporation when they pass, so they would like to look at options of how to pass that down tax-efficiently.
They want to determine an appropriate strategy to turn their business assets into a retirement income stream.
They want to look at options to ensure that each child is left with at least $1M as an inheritance.
Background Information: Assets & Debts
$130,000
Family income (pre-tax)
$350,000
Investments. Saving $700/month towards their investments
$400,000
Value of current house: Mortgage free
$250,000
Value of Cabin: With a remaining mortgage of $75,000
Current Situation:
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They have reached 95% of their retirement income goals.
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When they retire, they currently plan to sell the real estate inside of the business and take $5,000/month as a dividend until the corporation is depleted.
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Their current net estate would not quite meet their objectives of leaving each child with $1M.
Recommendations:
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Implement the ‘Corporate Estate Bond’ strategy to reduce the amount of taxable investment income their corporation will have, along with creating a tax-efficient way to pass the corporation proceeds down to their children
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Direct that cash flow to their retirement savings once their mortgage is paid off in 8 years.
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Delay receiving OAS until age 70, which increases their payments by 36%
Solutions:
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They are able to put the finishing touches on their retirement plan, and can now achieve the retirement lifestyle for which they had hoped.
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By utilizing the Corporate Estate Bond strategy, they can ensure their children will both receive an inheritance of at least $1M.
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This also reduces the amount of taxable investment income they have inside of the corporation.
Stories of Success Straight from Our Clients
I recently retired as part of a business transition which had a certain level of complexity due to the nature of the transaction. I was looking for Advisors focused on my vision for retirement and lifestyle and had a track record that demonstrated they could deliver.
Even though I have known Rob and Nonny for many years, I completed some due diligence to determine whether they would be “the right fit” for the type of investment management and financial planning I was looking for. A reference check of some of the other families they work with provided some reassurance and now that I have been through their process, my confidence level has grown even higher.
- Terry C. Professional, Retired