Estate Planning for Blended Families: Navigating Complex Relationships

estate planning for blended families

A blended family forms when two individuals come together (married or common-in-law) bringing a child/children from previous relationships. They may then have a child/children together. The dynamics of this family arrangement can be complicated, resulting in both rewards and challenges. Financial and/or emotional issues often arise when one of the partners passes, revealing a mix of expectations from the remaining partner, children, and the ex-spouse(s). To reduce conflict, mistrust, and/or discord, it’s important to have open discussions and to develop a detailed and comprehensive estate plan, particularly if ownership of a business is involved. Preparation and communication are key to easing family dynamics. So, what does estate planning for blended families in Canada look like? 

Estate planning tips for blended families:

The following are some estate planning tips to promote harmony in a blended family.

  • Keep estate documents updated: Be aware that separation/divorce does not affect pre-existing beneficiary designations. Ensure all documents are updated to reflect the blended status of your family (RRSPs, pension, insurance, will, etc.). 
  • Establish a mutual wills agreement: This contract between partners prohibits both from changing their will without the consent of the other. Mutual wills restrict the future testamentary freedom of the surviving spouse. 
  • Appoint a trustworthy, reliable executor, someone acceptable to all family members.
  • Consider a prenup: Creating a prenup presents the opportunity to begin communication and negotiation of difficult financial issues, providing protection and certainty for all involved/affected. Ensure the process is collaborative and based on mediation principles. 
  • Consider a trust: A trust (a fiduciary relationship that gives the trustee the right to hold title to property/assets for the benefit of a third party/parties) assists in the distribution of assets, solidifying a desired outcome. Tailor the trust to your preferences.
  • Communicate: Open, meaningful, ongoing dialogue with your partner and beneficiaries provides a means for making adjustments as circumstances change. 
  • Establish a power of attorney: If a partner is alive but unable to make decisions (personal care, property, business), a power of attorney may ensure that the new spouse/common-in-law partner is in charge of decision-making, reducing conflict with the ex-spouse and/or children. 
  • Seek advice: Obtain advice/assistance regarding the unique tax and law challenges of your blended family situation. Your chartered professional accountant can help guide you through the twists, turns, and pitfalls of estate planning (capital gains tax, estate-related taxes, and other expenses), particularly when ownership of a business is involved. 

A blended family often results in complicated estate planning challenges, particularly when a business is involved. Open and honest communication with all involved helps ensure harmonious relations. Keep beneficiary designations and documents current. Obtain advice to ensure that your estate plan meets your needs and desires. Consider tax and family law obligations. Contact your chartered professional accountant for assistance. 

Need help with business estate planning? Looking for advice and/or guidance? Cook and Company Chartered Professional Accountants (based out of Calgary and Edmonton) serve clients across Canada/United States, providing quality assurance, succession, and tax planning services for privately owned and managed companies. A detailed, tactful understanding of estate planning assists your company. Contact us today for a complimentary consultation.

Estate and Succession Planning for Businesses

Business Estate and Succession Planning

A stable and growing business is what every serious entrepreneur desires, but what about your company’s long-term future? After devoting much time, money, and effort to the creation and operation of your business, you’ll want to ensure a smooth succession process. Whether you’re selling it, passing it down to the next generation or closing it down, it’s important that you take the necessary steps to shape your business’s future in accordance with your needs. If you’re planning to sell, how can you get the most value for what you’ve built while enabling a successful transition of ownership? If retirement is on the horizon, who is best suited to take the wheel and bring the company to new heights? How can you protect your family, your personal assets and your business should you pass away? Whatever the circumstances, a smart exit strategy will make all the difference for you, your family and your business. The following are some estate and succession planning tips for business owners. 

Separate your Personal and Business Assets:

Without proper estate and succession planning, when you die default directives are applied that essentially lump your business assets in with all other assets you own. Your beneficiaries may be required to pay significantly more tax than necessary and the survival of your business may be threatened. To avoid this scenario, draft essential documents to separate your personal from your business possessions and make your wishes clear. 

    • A buy-sell agreement allows business stakeholders to retain or assume control of the business itself while letting you pass on the value of your stake to your personal beneficiaries. This type of agreement makes for less stressful outcomes for all concerned.
    • Powers of Attorney for your business interests/activities: These may differ from those authorized to administer your personal affairs.
    • A business succession plan: You may transfer your business outright to a beneficiary or set up a trust that can be used to control the assets of the business. 

Establish Estate Planning Asset Protection:

To do this you take nonexempt assets subject to creditors’ claims and reposition them as exempt assets through techniques such as family limited liability companies and irrevocable trusts for your spouse, children and other beneficiaries.

Undertake Estate Tax Planning:

In order to minimize the tax burden of settling your estate, there are estate planning concepts that can be applied to potentially taxable areas including RRSPs, RRIFs, and capital gains on real estate and shares.

Transferring the ownership and management of a company is a personally and professionally delicate process. Without skillful planning, a number of issues and mistakes are prone to arise. Revising and updating your succession and estate plan regularly is crucial. Constantly amend your plan for changes in desire and the current business environment. Everything is more achievable when you’re well-prepared and involve the right help. Talk to your Chartered Professional Accountant. They have the expertise, knowledge and experience to help you create and maintain a successful succession and estate plan for your business. Businesses deserve nothing less than to feel comfortable every step of the way.

 

Need help with business succession and estate planning? Looking for business advice? Contact Cook and Company Chartered Professional Accountants. We are based out of Calgary, Alberta, serving clients across Canada and the United States. We provide high-quality tax, assurance and succession planning services for a wide variety of privately-owned and managed companies. We possess a detailed and tactful understanding of business succession planning and its many moving parts. Contact us for a complimentary consultation.