How Successful Families Prepare for Tax at Death

Successful business-owner families often hold most of their wealth in private-company shares, real estate and investments—not cash.

At death, certain assets may be treated for tax purposes as though they were sold at fair market value, even when the family has no intention of selling them. 

Tax may be deferred when qualifying property transfers to a spouse, but a substantial liability can still arise when the surviving spouse dies.

Ask yourself:

• Do you know what the estimated tax bill could be at the surviving spouse’s death?
• How much of your family’s wealth is tied up in businesses, real estate and investments?
• Would your family have enough cash to pay the tax without selling those assets?
• Could they be forced to sell the business or property at the wrong time?
• Would they need to borrow money—or negotiate with the CRA?
• Would selling assets reduce what you intended to leave your children?
• Could life insurance provide the cash instead?
• Could corporate-owned insurance help move qualifying proceeds to shareholders through the Capital Dividend Account?

Without sufficient liquidity, your family may have to sell investments, borrow against property or take money from the business to pay the tax.

Properly structured life insurance can create cash when it is needed most. Instead of leaving the entire future liability for your family to solve, you can fund it gradually through planned premiums.

The objective is simple: provide money for the tax bill so your family can retain more of the assets you spent a lifetime building.

Review My Tax-at-Death Plan

Bring your corporate structure, estimated asset values and existing insurance information. Fusion can work alongside your accountant and legal advisors to identify the potential liquidity gap and explore whether life insurance should form part of the funding strategy.

Tax liabilities, insurance results and estate-planning outcomes depend on individual circumstances and future tax rules. Spousal rollovers and other tax-deferral provisions may apply. Fusion does not provide legal or tax advice. Clients should obtain projections and advice from qualified tax and legal professionals. Insurance coverage is subject to eligibility, underwriting and policy terms.

Work with your accountant to understand the potential tax arising from company shares, real estate, investments and other assets.

Create liquidity that may reduce the need to sell a business, property or investments simply to pay the tax.

When properly structured, qualifying corporate-owned life insurance proceeds may create a Capital Dividend Account credit that can support tax-free capital dividends to Canadian-resident shareholders.