A Smooth Transition Requires Guaranteed Funding.
A succession plan is only as strong as the capital backing it. Discover how Canadian business owners use corporate-owned life insurance, annuities, and segregated funds to guarantee a seamless transition and a fully funded exit strategy.
What is the concept: "Business successor planning"?
Business successor planning is the process of determining who will take over your business when you step down, retire, or unexpectedly pass away. However, many business owners make a critical mistake: they draft the legal agreements but fail to secure the funding required to execute the transition. If your successor does not have the liquid capital to buy your shares, the business may be forced to liquidate.
Our approach to successor planning integrates corporate life insurance, annuities, and specialized investment tools to financially engineer the transition. Whether the succession is planned (like a targeted retirement date) or sudden (due to critical illness or death), these tools guarantee that the exact amount of cash needed is available at the exact right time, without draining the company's operating capital or forcing the sale of assets.
How Can Canadian Businesses
Use It?
In Canada, navigating corporate taxes and the Canada Revenue Agency (CRA) during a business transfer can be complex. We use specialized insurance and investment contracts to ensure
the transition is highly tax-efficient and fully funded.
Here is how Canadian business owners use our tailored tools to power their succession plans:
Funding Buy-Sell Agreements
(Life Insurance)
If you have business partners, a buy-sell agreement dictates that the surviving partners will buy out a deceased partner’s shares. By backing this agreement with corporate-owned life insurance, a massive, tax-free lump sum is paid into the corporation upon a partner’s death. This cash flows out tax-free through the Capital Dividend Account (CDA) to buy the shares from the deceased partner’s grieving family, ensuring the family is fairly compensated and the surviving partners retain full control of the company.
Creating a Founder’s Pension (Annuities & Segregated Funds
When a founder is ready to hand over the reins to the next generation or a key employee, they need a reliable income to replace their salary. We help transition corporate retained earnings into an annuity or segregated funds. These act as a creditor-protected, guaranteed corporate pension, providing the exiting founder with a predictable, lifelong income stream that cannot be affected by the future performance of the business.
Retaining
Future Leaders
(Group Plans)
A succession plan relies heavily on keeping your top talent around until you are ready to exit. By implementing robust group plans and executive benefit packages, you lock in the loyalty of the key employees who will eventually take over the business, ensuring they don’t leave for a competitor before the transition occurs.
Estate Equalization
for Family
Businesses
If you plan to pass your business to one child who works in the company, but have other children who do not, it creates an inheritance imbalance. Corporate life insurance can be used to provide an equivalent, tax-free cash payout to the non-business children, keeping the business intact and the family harmonious.
Who is it for?
Properly funded successor planning is critical for the survival of any private company.
It is highly effective for:
Business Partnerships
Co-owners who want absolute certainty that they will not end up in business with their deceased partner’s spouse or children.
Family-Owned Enterprises
Founders who want to transition the company to the next generation seamlessly while equalizing their estate.
Retiring Entrepreneurs
Business owners 5 to 10 years away from their targeted exit date who need to lock in their guaranteed retirement income stream.
Companies Relying on Key Personnel
Businesses grooming specific top-tier employees to eventually buy out the founders.
Is Your Succession Plan
Fully Funded?
Do not leave your life’s work vulnerable to a lack of liquidity. At True North Life Insurance, we work alongside
your accountants and lawyers to structure the financial vehicles necessary
to make your succession plan a reality.