Estate Planning for Business Owners

 By Michael A. Mann 

Business owners should give special consideration to their business assets and operations when having Wills and/or Powers of Attorney for Property (“POAs”) prepared. In Ontario the law currently allows for an individual to prepare separate wills dealing with different groups of assets. The primary purpose of this to date has been to avoid the payment of probate tax on the value of shares which are owned in privately-held corporations upon death. That having been said, there are amendments being proposed to the Estates Administration Tax Act which may have the effect of applying probate tax to all assets in a person’s multiple Wills.

There is another reason, however, that dual Wills and dual POAs should be considered by business owners. In a typical situation where spouses are creating these documents, they will name each other as the primary executor of the Will and as the attorney in the POA. It generally follows that if they have adult children then one or more of those children will be named as alternate executors or attorneys, as the case may be; however, if the surviving spouse or surviving adult children know little about the business, you need to question whether it makes sense to name family members in those capacities.

As far as succession planning is concerned, the business owner should consider whether it is intended that the business continue to operate following the business owner’s death. If that is the case, then consider whether a surviving spouse or adult child is the best person to carry on that business. Similarly, if you, as the business owner, became incapacitated, who should take over your role in the company? Sometimes, your spouse or adult son/daughter might be the perfect choice; but if they know little about the business, who is going to maintain it while you are not physically or mentally able to do so?

One alternative might be a business colleague or partner. Clearly, you might not want this colleague to manage all aspects of your estate; however, as already indicated above, the law permits you to create concurrent documents which will authorize dealings with certain assets and debts but not others. Therefore, as an example, you may name a business colleague in a Limited Will and/or in a Limited POA to handle business affairs, and then name your spouse and/or adult children in the documents which deal with all other assets and debts under your control.

Another option to naming a business colleague would be to name a professional trustee – your lawyer, your accountant or a trust company (often affiliated with a financial institution) that specializes in dealing with estate administration. While there are fees and compensation amounts that would be payable to such professional trustees, this alternative may provide the objectivity and business savvy that is required in order to deal with your interests.

Whomever you choose as your executor and attorney, make sure that the candidate is agreeable to serving in this capacity and has the ability to manage your affairs effectively. Also ensure that your documents are properly drafted by a lawyer in order to clearly set out your intentions.

The foregoing information is provided to you for information purposes only. We caution you to obtain legal advice specific to your situation in all circumstances. 

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