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:

They have reached 95% of their retirement income goals.
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.
Their current net estate would not quite meet their objectives of leaving each child with $1M.

Recommendations:

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
Direct that cash flow to their retirement savings once their mortgage is paid off in 8 years.
Delay receiving OAS until age 70, which increases their payments by 36%

Solutions:

They are able to put the finishing touches on their retirement plan, and can now achieve the retirement lifestyle for which they had hoped.
By utilizing the Corporate Estate Bond strategy, they can ensure their children will both receive an inheritance of at least $1M.
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