This is the first of what will become a periodic and hopefully ongoing case study series. My hope is that these real world scenarios will help someone or someone’s family think of a new solution or a new way of looking at a problem.
Today we look at Ashley and Albert. Ashley and Albert are in their mid-sixties and are thinking about retirement. They’ve worked hard to build a business and to raise their three children. They want to make sure that their estate is divided evenly between all three children.
Their situation
- 64-year-old male and 64-year-old female, both non-smokers.
- Own a successful metal fabrication business and plan to retire in the next three years.
- Three grown children, David, Megan and Gabriel.
- Gabriel helps run the family business and plans to purchase it from his parents.
- Michael and Jenny have their own careers outside the family business.
Their challenge
- Looking for life insurance coverage to help pay capital gains and probate liabilities at death.
- Also need coverage to equalize their estate for all three children.
Their solution
- With the advice of their accountant, Ashley and Albert plan on executing an estate freeze to lock in the value of the company but still be able to have some control.
- The company is valued at $3.5 million at the time of the estate freeze.
- The capital gains and tax liability are projected to be $500,000.
- Peter and June would like an additional $1 million in coverage to be split between David and Megan to compensate for the favourable arrangement with Gabriel for the purchase of the business.
- They choose non-Participating life insurance that they will pay to Age 100 or when the last of the two of them dies. It is a Joint Last-to-die with $1,500,000 coverage: Their Annual premium is $26,015
- Both David and Megan will receive $500,000 tax-free each and Gabriel can use his $500,000 to pay the capital gains that will be owed on the family business.
As you can see, this is a solution for Ashley and Albert that addresses their desire to split the estate evenly between all three children, and still allows Gabriel to carry on the business.
Remember that the proceeds of a life insurance settlement will avoid probate, is paid to the beneficiaries tax-free, and often within a week of the life insured passing away. Those are three very powerful friends when it comes to helping your beneficiaries.
I look forward to your comments and suggestions regarding this case study series.
If you would like to talk about how we can help with evenly dividing your estate evenly between your children, or any other scenario, please feel free to reach out to me at kbh@kbhenry.ca or book a free 15-minute call with me here: Ask Me Anything
With Gratitude,
KB.
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