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Estate Planning Series – Part One

In this three-part series Lott and Company outlines the why, what, how and who around the essentials of creating an estate plan that effectively preserves, manages and distributes your personal and business assets after death.

For small business owners, estate planning can be especially critical as the majority of their family assets and income sources may be tied up in the business. In addition, to be effective, estate plans for small businesses need to address the owner’s unique personal, family and business situations and meet the often-conflicting needs of a number of people with a stake in the business. Over the years we have been involved in developing and advising on many estate plans. A well thought out estate plan is essential to good business and ensures that your family is cared for should anything happen to you, and that your money and assets are directed according to your wishes.

An estate plan for business owners plans for the transfer of your personal and business assets when you die while minimizing the taxes your estate or heirs are required to pay. An effective estate plan ensures that there is adequate cash available to pay debts and taxes and has an orderly distribution to beneficiaries. Estate planning is an ongoing process that evolves as your needs and business circumstances change.

Part One

Why is an estate plan essential?

What strategies can be used in estate planning?

Part Two

How to lay the foundation for an effective estate plan?

Part Three

How to ensure your family/benefactors are taken care of per your estate directives?

Why is an estate plan essential?

Estate planning is designed to:

· Ease the strain and provide for family/benefactors in the event of disability or death

· Reduce the tax liability for the estate and the heirs

· Preserve the value in the company

· Ensure there is liquidity to cover taxes and business-related costs at death so the business can continue uninterrupted (whether it is to be sold or kept in the family)

· Plan for succession, transfer or sale of the owner’s share in the company in the event of retirement, disability or death.

What strategies can be used in estate planning?

Developing an estate plan is unique to your personal goals and circumstances and the strategies used will depend on your situation. Generally, the main strategies to consider are:

· Ensure wills and power of attorneys (POAs) are in place and up to date

· Appoint competent executors/trustees

· Develop a survivor’s business plan

· Ensure adequate life and disability insurance to protect your family

· Consider key person insurance to fund a buyout

· Investigate estate freezes to help minimize tax on capital gains in the estate

· Use a discretionary trust

· Draw up shareholder/partnership buy-sell agreements

· Set up a spousal trust to help you defer and lower tax and protect your capital

· Leave non-business assets to non-active children

· Establish separate pools of assets such as RRSPs, TFSAs and other investment accounts and/or establish a holding company to help manage your assets

Equally important and in addition to these business and wealth preservation strategies, there are many emotional aspects of succession and estate planning that small business owners should be aware of. Communication is key for business owners who have grown children and wish to equalize benefits, achieve fairness and minimize conflicts.

In the upcoming Part Two of our Lott & Company three part Estate Planning series we will discuss how to lay the foundation for an effective estate plan.

We would like to thank Lott & Company Professional Corporation for being this week's RHBOT Guest Blogger and bringing us this incredible series.


Lott & Company are experienced in working with clients to review, update or design an estate plan that­­­ considers unique circumstances and ensures personal and business assets are protected and distributed specific to requests. They have worked with many business owners (and their financial and legal advisors) to develop tailored estate plans that suit their needs and wishes.

Lott and Company 905-947-4388

500 Cochrane Drive, Unit #5 Markham, ON L3R 8E2


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