Meet Mr. H.: a long-time entrepreneur who had amassed a considerable net worth by the time he reached age 75. Retired and interested in keeping life simple, most of his wealth was sitting in an investment holding company.
His one concern? Ensuring the legacy he passed onto his 4 adult children when he passed was secure.
His one request? That we avoid fancy corporate structures, and keep things simple.
We reviewed three things on Mr. H.’s behalf: his will, his complete networth picture, and his investment holding company financial statement and tax return. Based on what we found, we made two recommendations:
From the review of these documents it was clear that the will was properly taking care of his children's interests and the estate size was considerable. Our only recorded was with respect to reducing the taxes due on death from his Investment Holding Company.
For the Investment Holding company, we recommended that he start paying himself large dividends and recovering corporate refundable divided taxes. The corporate refundable taxes offset the additional personal taxes he would have to pay but the net dividend would be used to increase his shareholder loan account.
Mr. H. took our advice and over a 3 year period, we increased his shareholder loan account by approximately $2 million dollars. The good news is that if he was to pass away, we could remove this shareholder loan tax free and provide it to the children after paying any corporate taxes on the liquidation value of his corporate investments.
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