Corporate Client Experience

Rockcliffe Wealth Advisors met with a business client recently for a comprehensive review of her personal and business affairs. The client informed us that she wanted to slow down in the years ahead. We then applied the Strategic Business Advantage™ process to determine how to improve the client’s situation. The following changes were made as a result.

On the personal side, the assets held in her RRSP, non-registered and TFSA accounts were reviewed. Recommendations were provided that moved a higher percentage of her fixed income assets to her RRSP to improve the tax efficiency of her holdings. Restructuring the assets that were creating annual income from the non-registered account reduced the tax that had to be paid each year. Annually the TFSA contribution is now being maximized to further reduce the tax liability on any income earned from the non-registered assets. The asset allocations are now reviewed periodically to ensure that they meet the client’s needs and that they also reflect the most current market conditions.

On the business side of the client’s affairs there had been several new businesses started up with other family members. Recommendations on the corporate structures were provided. The client is working with their lawyer and accountant to implement these changes to reduce the potential tax paid on the eventual disposal of the shares in each corporation.

In the primary business, personally held term insurance was transferred to the corporation. This was done to commence estate planning using the financial assets held in the corporation. In looking at where the premium for the policy was to be paid from, it was determined that it was more tax effective to pay the annual premium from the corporation as opposed to paying it personally. The financial assets in the corporation were re-structured using corporate class investment funds that will generate future income in the form of capital gains. This is important in a corporation because it attracts the least amount of tax (23%) that can be paid on passive income earned in the corporation. The other important advantage is that the non-taxable portion of any capital gain earned by the corporation can be paid out to the shareholders tax-free through the Capital Dividend Account (CDA). This potential source of income was included when calculating the retirement income for the client.

As part of the deeper planning work done, it was also recommended to convert the term policy that had been transferred to the corporation into permanent participating life insurance because lifetime coverage was needed. This was also done to create further tax advantaged growth of the assets in the corporation. As the policy was convertible there was no medical underwriting required which is an often over-looked feature of some term policies. We also recommended a participating insurance policy because of its ability to increase in value through annual dividends that are paid to the policy owner. The annual dividend creates cash value in the policy that can be accessed by the corporation. In this case the cash value has been included as a potential source of income in retirement once the other sources of income from the other assets are reduced. The final advantage is that the death benefit will eventually be paid to the corporation and it can be paid out to the shareholders through the CDA on a tax free basis.

The client is now comfortable that her personal and business affairs are well on their way to being appropriately structured to be tax efficient, provide a reasonable return over time and create a sustainable income in retirement. They are also pleased that they have addressed many of their estate planning needs by implementing the recommendations which Rockcliffe Wealth Advisors have provided. Ongoing reviews will ensure that the client’s goals continue to be met.


Overview of the Business Client Experience

  • A financial plan that laid out where the income in retirement would come from and how that was integrated with assets held in the Corporation
  • An analysis of potential tax issues and a plan to address them
  • A plan to structure the financial assets in the corporation to reduce income tax
  • The plan is flexible enough to allow for changes that may occur down the road
  • Client is comfortable knowing there is a strategy moving forward