A retired couple with a $20 million holding company wanted three things: steady income, a smaller tax bill at death, and more for their kids. Here is the plan we modelled and what it could mean over 20 years.
Robert and Elaine Hartwell, ages 67 and 66, built a business, sold it, and kept the proceeds invested in a holding company. They draw $300,000 a year to live on. They want the rest to go to their two adult children with as little lost to tax as possible.
When the second spouse passes away, the shares of the holding company are treated as sold. Without planning, the same money can be taxed twice: once in the estate and again when the company pays it out.
of the company could go to tax with no planning at all.
tax bill at death even with the usual after-death planning, all due at once.
The parents’ shares are fixed at $20M. All future growth goes to new shares owned by the children, so it is no longer taxed in the parents’ estate.
The $300K they already need each year is paid by buying back some of their frozen shares. Same income, same tax, but their estate shrinks every year.
The company owns a joint policy that pays when the second spouse dies. Most of it can flow out to the family tax-free through the capital dividend account.
Total to the family after tax, in millions of dollars. All four versions pay the parents the same $300K a year.
Every family is different. In a free 30-minute call, we’ll look at your company, your income needs and your goals, and tell you whether a plan like this is worth exploring.
Book a 30-minute callMunish Mehan, CFP®, CLU® · Mehan Private Wealth
Related services: Estate Planning · Business Owners · Insurance Planning · All planning scenarios
Important: This is a hypothetical illustration based on a real planning case. Names and some details have been changed to protect privacy. The figures are projections, not actual or guaranteed results. They assume 4% annual growth, the second death at year 20, $300,000 a year paid to the parents ($200,000 as eligible dividends and $100,000 from the capital dividend account), current top Alberta tax rates, a post-mortem pipeline at death, and premiums paid from fixed income earning 2.5% after tax. The children’s future tax on their shares is shown in today’s dollars at 4%. Insurance figures come from a policy illustration; coverage is subject to medical underwriting and the insurer’s terms, and non-guaranteed values may change. Results will differ with growth rates, timing of death, tax law and personal circumstances. Estate freezes and post-mortem planning must be implemented with your accountant and lawyer. This page is for general information only and is not tax, legal or investment advice.
