Estate Planning Series – Part Three



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.


If you have not yet reviewed the previous parts, we encourage you to visit Part 1 and Part 2 where we covered why an estate plan is essential and what strategies are available to meet your personal and business goals in part one, and in part two we covered how to lay the foundation to support an effective estate plan.


In this final part we will discuss how to ensure your family/benefactors are taken care of per your estate directives and who can assist you to ensure your goals are met and your wishes are executed?


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

Estate freeze

  • Allows the future growth of the business to accrue to the next generation, thereby capping the growth on which current owners will be taxed on death

  • Owner converts common shares to preferred shares, with children subscribing for common shares at a nominal value

  • Family trust can be setup as part of the freeze to allow flexibility regarding the timing and amount of distributions to beneficiaries and provides for control and management by the owner and trustees until such time that the children or other intended beneficiaries are financially mature

Discretionary trust

  • Particularly important when the decision regarding which children will succeed their parents in the business has not yet been decided

  • Trustee could have full control over both business and non-business assets until shares and assets are transferred to the beneficiaries

Shareholder/partnership agreement

  • For companies that involve more than one person

  • Pre-determines what will happen if a shareholder or partner becomes disabled, divorced, retired or dies

  • Buy-sell provisions set out how surviving partners/shareholders will buy out the deceased’s share of the business, how the price is determined and how and when the proceeds will be paid.

  • Funding of buyout is often through life insurance to avoid unwelcomed partners like spouses or other heirs

  • Prevents beneficiaries from being locked into an illiquid asset with no way to realize on it

Spousal trust

  • Setup through the will to provide the surviving spouse with income from the business and other assets for their lifetime, with the capital transferring to the children on the surviving spouse’s death

Leave non-business assets to non-active children

  • The owner may wish to leave the business only to the active children to minimize conflicts within the business if active and non-active children are shareholders

  • To equalize benefits, the owner may decide to leave a controlling interest to the active child and leave the non-active children with a non-voting interest (e.g. preferred shares), non-business assets (e.g. a house) and/or life insurance proceeds

  • There are valuation issues that will need to be reviewed

Separate pool of assets

  • Ensures the business owners and spouse are not dependent totally on the continued success of the business during retirement

  • A holding company can be used to hold assets of the operating company

  • The holding company can be established during the freeze to hold preferred shares of the operating company or other investment assets

  • Dividends from the holding company can then be used to support the owner or surviving spouse during retirement


Who can assist you to ensure your goals are met, your wishes are executed, and your beneficiaries are taken care of after your death?


Planning is absolutely key and it is never too early to start planning for your estate and to review your current plans. There are many considerations to ensure your plan reflects your wishes and understanding of how your business and assets will be handled after your death.




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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