115 Hurontario Street, 4th floor
A business owner, who sold a family business, needed the assurance that their finances were structured properly for retirement. They were concerned about maintaining the current lifestyle but not outliving and spending the proceeds from the sale of the business.
A plan was built around the specific needs of the family. A coordinated strategic plan was built using BMO Nesbitt Burns’ sophisticated planning software. It addressed financial planning, estate planning, investment planning, tax efficiency and cash flow. Outside advisors were consulted to put together various trusts and holding companies to minimize taxes and probate costs. The investment plan was tailored to provide current cash flow, as well as allow for growth to preserve future purchasing power. The portfolio was a combination of a tailor made domestic portfolio coupled with top outside investment managers for the International segment of the portfolio.
The business owner and family are now confident that their unique and specific needs were addressed and have a process to keep on track.
Canadian Snowbirds, who spend four months a year in the US, had a sizable $US cash balance from the sale of surplus real estate. With the low rates they were falling behind on their US cash flow needs.
We reviewed their current and future cash flow needs and considered, US tax, US estate taxes and Canadian tax. A portfolio of US dollar Canadian Issuer Step-up bonds and preferred shares was custom built for them. The portfolio provided an increasing regular and predictable cash flow in US dollars. They were able to avoid US estate tax as the securities were issued by Canadian companies. The preferred shares gave them a more tax efficient income stream that helped leave more money for them to enjoy themselves while away. Keeping the entire portfolio in US dollars eliminated the challenges of predicting currency movements as they now had a US cash flow to meet current and future US dollar costs.
A Business Owner of a Canadian Controlled Private Corporation (CCPC), as a result of a very successful year, was accumulating a significant cash balance in the business. They were faced with having to declare a large dividend and face the tax bill or lose the business’s designation of a qualified CCPC (to qualify the business must have 90% of its assets active in Canada – cash does not qualify). If they lost the CCPC designation they would lose the $500,000 capital gains exemption on sale of the business.
They were also concerned about building a larger retirement pool. They had plowed most of the money into the business to build it and had not contributed a large amount to their RRSP. They were also concerned about creditor protection of the family’s nest egg.
The solution was to help them set up an Individual Pension Plan (IPP) as well as a Retirement Compensation Agreement (RCA). This allowed them to make a very sizable contribution to the new IPP and RCA. This sheltered their savings from potential creditors as well as significantly increases the nest egg for the family. They were able to get cash out of the business and into a retirement program on a tax deferred basis and protect the CCPC status.
The investment solution was a combination of tax efficient Exchange Traded Funds for the RCA and a tailored portfolio for the IPP. They were able to run the set up costs and management fees through the business. The entire program was implemented at a fraction of the cost of an equivalent balanced mutual fund or segregated fund.
|Not for Profit Organization
This organization was able to build a significant capital fund. They wanted the fund to help defray operating costs but found that interest rates would not allow them to do so. They were also concerned that over time inflation would erode the purchasing power of the capital fund and the value of interest payments.
The solution was to custom build a balanced portfolio of Government Guaranteed bonds along with a mixture of equity investments. The stocks were a mix of high quality dividend paying issuers with a long history of paying and increasing dividends. The result was a portfolio that was able to meet the current cash flow needs but also with the potential over the long time horizon of the organization to grow capital and as well as income from increasing dividends. Again this was done at a fraction of the cost of Canadian Balanced Mutual fund.