EP 74 · 2024-06-04 · 55:01
The 'If You Died Tomorrow' Test: Succession & Tax Planning for Construction Business Owners
Two CFPs coach construction owners on succession, tax, and getting out alive.
PF
⟶ The story, written up — a sharp read with every fact on the record. Or skip straight to the moments that matter, as clips.
// CHAPTERS — TAP TO JUMP THE PLAYER
0:12Succession and the fear of retiring — Cold open straight into succession planning: no plan is ever perfect, owners who can retire but won't, and the psychology of identity loss when work is your whole life.3:20The 'if you died tomorrow' test — Peter's litmus for whether a business is sellable: if you died tonight, would it fall apart or run fine? His own practice passes because partner Aaron could take over. The more flushed-out the owner, the more valuable the business.8:01The boomer wealth transfer and economic stakes — COVID digitization lessons, the intergenerational shift in the trades, and trillions of dollars of business value changing hands over 10 years. Their goal: keep Nova Scotia businesses from dying for lack of a successor.13:04Who actually takes over: kids, managers, key clients — Owners assume a child will take over but never ask; kids in their 40s-50s often don't want it. Often the better buyer is the management team or a key client/subcontractor. Real cautionary stories (Will Dennis).19:30Technical pillars: RSPs, IPPs, salary vs dividends — Don't feel bad about unused RSP room; mandatory RRIF withdrawals at 72; individual pension plans for owners with no pension; mixing salary (creates RSP room, CPP) and dividends (preferentially taxed); spousal-RSP income splitting.26:32Wealth insurance and the TFSA 'box' — Corporate-owned life insurance as a deductible expense and the country's biggest tax shelter; TFSA explained as a box you fill with investments, not cash; using it to privately balance an estate among kids.31:18Building the financial team — Banks educate to sell, not to inform; the planner is the 'financial quarterback' who convenes accountant, banker, and lawyer so the client gets one agreed plan instead of siloed advice.35:24Asking for help and new government programs — Men's reluctance to admit financial gaps; you're not expected to know everything. New programs clients miss: First Home Savings Account, RDSP for a disabled grandchild, the Canada Dental plan income thresholds.43:15Trusts you didn't know you had + change fatigue — Joint ownership of a child's house or a parent's bank account is effectively a trust now reportable to CRA (2023 rules, deferred a year). Things change so fast that staying current is the planner's job, not the owner's.46:12The ideal client and where they add value — Everyone needs some advice; they triage to bankers/accountants when appropriate. Their best fit is owners unsure they have a succession plan. The vacation/death stress test again, plus off-hours availability.51:10Wills, beneficiaries, and the no-excuse close — Shockingly few owners have current wills; name beneficiaries by percentage on RSPs/TFSAs/insurance rather than in the will to avoid probate. Closing pitch: there's no charge for an intro conversation, just reach out.
// THE INTRO
Repeat sponsor-guests Peter Freeman and Aaron Dressler of Freeman Financial (IG Wealth) sit down with the hosts for a wide-ranging financial-planning conversation aimed at Atlantic Canada construction owners. They press on succession readiness ("if you died tomorrow, what happens to the business?"), the trillion-dollar boomer-owner wealth transfer hitting the region, and operator-grade tax tools: RSPs, individual pension plans, salary-vs-dividend mix, wealth insurance, TFSAs, the new First Home Savings and RDSP programs, and trust-reporting traps. The throughline is relational and reassuring rather than technical: you are not supposed to know all this, so build a financial team. It serves the show's belonging contract by giving a long-time sponsor a warm platform, but lands more as information than community.
// THE LESSONS
See all 22 lessons ▸Test whether a business is sellable by asking: if the owner died tomorrow, would it run fine or fall apart?
“if you were to die today or not come back to work for whatever reason how would the business evolve”
A business is most valuable when the owner can leave for months and the team runs it better, not worse.
“the more they flush me out the door the more the business does because the management team they make changes”
Digitize records before you're forced to; the paperless practice survived COVID while paper-based ones scrambled.
“we were the only practice in Atlanta canida to have done that when Co came”
Over 50% of businesses will change hands in 10 years; start succession planning early because people die or get sick.
“more than 50% of business owners will change hands in the next 10 years”
Don't assume a child wants the business; kids in their 40s-50s usually have their own careers and decline.
“the intention is there hey I want to pass this on to my kids but often the kids don't want to do it”
The easiest succession buyer is often your own management team, who already run the business well.
“can you create some structure to allow your management team to buy you out because then the business is functioning”
Check client/subcontractor concentration: a key client or supplier may be the natural buyer of your business.
“shouldn't we be talking to that company about them buying you out because if your business just closes up”
The most successful owners aren't in the office; they're on the shop floor with staff and customers.
“our most successful business owners you know they're not the ones that are sitting in their office”
Unused RSP room isn't a failure; you may need that deduction later to shelter a business-sale capital gain.
“if they sell their business and they have a huge capital gain that they can't shelter then it comes in huge value”
Owners with no employer pension can use an Individual Pension Plan for a larger deduction than an RSP.
“you can deduct more money deduct more income you can have a larger deduction than you could for an RSP”
Mix salary and dividends: salary builds RSP room and CPP, dividends are taxed more favourably.
“they will pull money out as salary because they do want to create some taxable income that creates RSP room”
Corporate-owned life insurance can be a deductible expense and is the biggest legal tax shelter available.
“the biggest tax shelter that really is out there in this country is life insurance”
A TFSA is just a box; put growth investments in it, not default cash, or it earns almost nothing.
“think of the tfsa as just a box Inside the Box you could put many different things often the default is cash”
Banks are designed to sell products, not educate; budget for an advisor who explains the long-term picture.
“their role is into education clients it's often just to sell a product and move on”
Use a financial planner as 'quarterback' to align accountant, banker, and lawyer on one agreed plan.
“so we're the financial quarterbacks”
You're not expected to know finance any more than your planner knows home building; ask for help.
“I wouldn't expect you to know everything about financial planning”
New programs are easy to miss: the First Home Savings Account gives tax-deductible, tax-free-out home savings.
“the kids can put up to $8,000 a year in it's tax deductible like you would be putting money to an RSP”
A disabled child/grandchild can unlock an RDSP with thousands in government matching once approved.
“here's a program where the government's giving thousands of dollars a year of free money”
Joint ownership of a home or bank account is a trust now reportable to CRA; most owners don't realize it.
“did you become a joint owner in her bank account oh yes... I said do you know you're in a trust relationship”
Name beneficiaries by percentage directly on RSPs, TFSAs, and insurance rather than in the will to avoid probate.
“none of those things should be named in your will in a lot of situations”
Get a current will: shockingly few owners have one, and a 28-year-old will no longer fits the business.
“it always amazes me how few people have current Wills in place”
Most owners stay in past 65, leaving a one-person service business that should be liquidated, not sold.
“this is you know a sole business that it's a service related business it's going to live and die with him”
// CLIPS FROM THIS EPISODE
Story · 3:02
“because work was his life”
Framework · 4:49
“I think about like pro athletes who retire”
Framework · 5:53
“if you were to die today how would the business evolve”
Hot take · 7:33
“a business owner will say to us oh yeah I go on vacation for two or three months”
Story · 8:18
“when we had covid came well first of all we digitalized our practice”
Hot take · 11:21
“there's been talk for years about what's going to happen when the Baby Boomers retire”
Framework · 13:13
“we'll talk to a business owner and say so who's your largest client”
Emotional · 14:44
“guy that I went to school with his name was Will Dennis”
Exchange · 16:08
“we even had clients say to us so if you were to die who would take over the business”
Framework · 16:47
“we find sometimes the easier conversation is who's in your management team”
Story · 18:38
“we find our most successful business owners they're not the ones sitting in their office”
Story · 31:34
“client I spoke to last week has two tfsas one at a bank one with us”
Exchange · 36:47
“I'm not going to say I know everything about home building that's your expertise”
Hot take · 40:40
“what are you afraid of or what would you feel more confident that you knew more about”
Hot take · 51:12
“it always amazes me how few people have current Wills in place”
All 22 lessons from this episode, on one page.
Sent to your inbox. The receipts included.
// FEATURED BUSINESSES
// FACT-CHECKED ✓ web-verified, with sources
✓ VERIFIED
Kids can put up to $8,000 a year into the First Home Savings Account (FHSA), and it is tax-deductible like an RSP with tax-free withdrawals.
SOURCE ▸✓ VERIFIED
Joint ownership of a child's home or a parent's bank account is effectively a trust now reportable to CRA; the rule was announced but deferred a year.
SOURCE ▸// COMPANIES & ORGS ✓ verified
Freeman Group Private Wealth Management ▸IG Wealth Management Inc. ▸Peter FreemanAaron DresslerSaltWire Network
// PROJECTS NAMED
First Home Savings AccountRDSPCanada Dental PlanIndividual Pension PlanBare trust reporting rules
SOURCE: podscope · public episode data · M_wpWQsOdhk