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As a business owner, either small or large, there is absolutely no doubt that you and/or your partners have worked extremely hard to build your business and increase its value! Whether you started the business from scratch or purchased an existing company and proceeded to make it grow, the fact is that your business value has probably increased well beyond your initial investment.
In the event of death, any individual who owns shares in a corporation, a partnership interest, or business assets (such as in the case of a sole proprietorship) will be deemed by Canada Revenue Agency to have disposed of these properties. As a result, a tax liability may arise in the form of Capital Gains and Recaptured Capital Cost Allowance. If funds or other assets are not available to pay the tax liability the following two situation may arise:
Life Insurance can be purchased to provide the necessary funds needed to pay both the:
Life Insurance is a particularly valuable funding vehicle if the beneficiaries want to retain the Business or business property and assets OR if the market conditions will not provide the estate with an amount equal to the fair market value of the property.
The insurance solution can be structured in different ways depending upon the unique needs of each business. An individual could own the life insurance policy or it could be owned by the corporation/partnership and dispersed to the individual’s estate after death.
Please contact Health Risk should you have any specific questions you may have regarding Funding Capital Gains Tax on a Business at Death or if you would like to receive a quotation.
We respectfully acknowledge that we are located on the traditional territories of many First Nations, Métis, and Inuit peoples who have cared for this land for generations. We honour their histories, languages, cultures, and ongoing contributions to our shared communities.