Managing Wealth Over Your Lifetime

Whether you are a new graduate, working as an associate, running your own practice or approaching retirement, tax, financial and retirement planning will always play a key part at every stage of your career. As your personal, professional and financial situations evolve, you should ensure that you’ve done appropriate planning to help you achieve your goals and objectives throughout the different stages of your professional life.

We've found that many self-employed professionals are focused on different issues at different stages of their career, although no two careers evolve exactly the same way.

 

Phase 1: The Early Years

During the early years the following are common key considerations:

  • Working as an employee vs. contractor
  • Should you incorporate?
  • Managing your finances:
    • Student debt
    • Cashflow management
    • Starting to invest (RRSP vs. TFSA)
    • Disability planning
    • Major purchases (home and auto)
    • Smart tax planning
  • Estate Planning
    • Wills
    • Powers of Attorney

Phase 2: Starting Out on Your Own

When starting out on your own, the following are common key considerations:

  • Options for getting started
    • Buying into a practice or partnership
    • Starting your own from scratch
    • Purchasing an existing practice
  • Finding the right business structure
    • Sole Proprietorship
    • Partnership
    • Professional Corporation (PC)
  • Valuing an existing practice
  • Shareholders’/partnership agreement
  • Having a family
  • Starting and funding an RESP
  • Understand income splitting and family trusts to mitigate high tax rate
  • Updating estate planning documents
  • Creditor proofing assets
  • Forecasting retirement projections
  • Checking needs for life and disability insurance

Phase 3: The Peak Earning Years

During your peak earning years, the following are common key considerations:

  • Minimizing taxes
  • Mitigating risks
  • Accumulating wealth
  • Using a PC to defer taxes
  • Structuring your PC correctly and transferring assets
  • Navigating GST/HST issues
  • Corporate share structure
  • Introducing family members as PC shareholders
  • Income splitting
    • Be mindful of attribution rules
  • Acquiring another practice
  • SR&ED Program
  • Using surplus cash
  • Setting up a holding company
  • Setting up a family trust
  • Implementing an Individual Pension Plan (IPP)
  • Private Health Services Plan (PHSP)
  • Corporate-owned life insurance can potentially be used for:
    • Income for protection for survivors
    • Funding buy-sell agreements
    • Paying capital gains taxes on death

 

Phase 4: Preparing For Retirement

While preparing for retirement, the following are common key considerations:

  • Have you decided what to do with your existing practice?
  • How do you plan to exit from your current business?
  • Do you have a sufficient stream of income or assets to fund your retirement?
  • Leaving your practice
    • Winding up your practice (convert PC?)
    • Internal sale
    • External sale
    • Consideration for clients/patients, staff, partners, creditors, suppliers
    • Asset sale vs. share sale
      • Can you claim the lifetime capital gains exemption (LCGE)?
  • Financial considerations
    • Layering sources of retirement income
    • Managing income sources in a tax-efficient manner
    • Plan your retirement finances well in advance
  • Estate planning
    • Update Power of Attorney (POA), Will(s) and insurance coverage
    • Contingency planning (i.e.planned locum agreement in healthcare)
    • Minimize double tax exposure with PC

Phase 5: Enjoying Retirement

During retirement, the following are common key considerations:

  • Having a written plan that merges your life priorities with your financial resources
  • Consolidating your income-producing assets in one place, to get the best possible overall results
  • Layering income sources efficiently (RIF, OAS, CPP, Dividends, etc) to maximize cash flow, income and your estate (and minimize current and future taxes)
  • Structuring your income to preserve the value of government benefits
  • Combine safety and growth potential to create an efficient stream of cash flow for life
  • Plan for (and implement solutions for) health-related costs and efficiently transferring your estate

 

If you are a Self-Employed Professional and think it would be helpful to discuss your financial life and goals, contact Chris today to schedule a no-obligation strategy call.

This page contains several strategies, not all of which will apply to your particular financial circumstances. The information in this page is not intended to provide legal, tax, or insurance advice. To ensure that your own circumstances have been properly considered and that action is taken based on the latest information available, you should obtain professional advice from a qualified tax, legal, and/or insurance advisor before acting on any of the information in this article.