Five Estate Planning Tips for Canadian Online Business Owners
May 14, 2021
No one wants to talk about death. I totally get it. But as Benjamin Franklin famously said "In this world nothing can be said to be certain, except death and taxes."
So for business owners, including online business owners, it is important to do some planning to protect both your business value and also your family members.
Why should I care - I'll be Dead!
One of the inspirations for writing this article now was the recent CBC article featuring my friend Dianne Taylor. Dianne's grief was compounded when her spouse Tim died suddenly and had not been aware that his RRSP designation was still in favour of his mother, not his spouse. The laws of Nova Scotia did not help her recover their retirement savings.
If you think that you don't need to worry about your estate planning because you will be dead, think about your family. They will be the ones left to deal with the consequences.
So onto my top five estate planning tips for Canadian Online Business owners:
Make sure your will is up to date, including having an appropriate executor.
I have often said that the most important decision you make when you draft a will is to name an executor (and alternate executor). It is important as a business owner that your executor has the knowledge and skills to deal with business assets as well as your personal assets and family situation.
The executor has a big job - they need to determine what your assets are, pay your debts (including taxes) and then distribute any remaining assets to the beneficiaries in accordance with the will.
Picking the right executor and giving them access to the proper information about your business assets, business advisors and accounts will help them do their job.
Check your beneficiary designations in your Insurance Policies policies and Registered Plans (RRSP, RRIF, TFSA).
Insurance policies and registered plans are important to consider when you do your estate planning. When you make a beneficiary designation on a form or in your will, you are indicating that the proceeds will go directly to the named beneficiaries, and not be part of the assets deal with by the terms of your will.
Make sure to get a confirmation in writing of who your beneficiaries are. They may not appear on your statements. And having the wrong beneficiary named, can have horrible consequences for your family.
Consider what you would want to happen to your business upon your death or disability and make a plan.
Succession planning for your business does not have to be fancy or elaborate.
Do you have a co-owner? If so, your shareholder or partnership agreement should consider what would happen if one owner dies.
Is there an employee, supplier or even a competitor who may want to buy your business? Document this information.
If you do any planning with your accountant, financial advisor or lawyer, make sure your executor has their contact information and knows to reach out to them.
Consider your digital or other intangible assets.
It may not seem as obvious to an online business owner that they should leave details of their digital assets for their executor.
Your business likely has created social media accounts, copyrighted content, online courses and memberships and client lists. These are all important business assets that could be sold or otherwise disposed of on your death.
Think about how you can provide passwords and access to your executor for your intangible assets as they will form part of your estate, just like your china and your piano.
Don't forget about personal directives and property powers of attorney.
So far we have been talking about what happens if you die, but it is also a risk for your business if you become temporarily or permanently incapacitated.
Personal directives give someone else the power to make personal care (non-financial) decisions on your behalf if you become incapacitated.
Powers of attorney (property) can give someone else power to deal with your financial assets, including your business assets, if you are incapacitated. This can be useful to be able to make financial decisions and access bank accounts, tax accounts etc.
It is not fun to think about death or disability, but doing so can help protect your business and your family in the event the unexpected happens.
Choosing an appropriate executor and having regular communications with them will help everyone to be well prepared.