“As a small business owner, I understand many of the challenges that fellow owners face on a daily basis. My job is to take accountability for all facets of your financial plan, allowing you to focus on what makes you happy.”
– Jeff Graham, CFP, CLU, First Oak Owner
1. Planning for unanticipated events, both in and out of the business
2. Accumulating & transferring wealth on a tax-advantaged basis within the corporation
Corporate-Owned Life Insurance (Personal or Business Need)
Some business owners choose to hold their life insurance policies in their corporation. This is typically done when it will be less expensive to pay the premium corporately, compared to withdrawing funds to pay the premium personally. When setting up a corporate-owned insurance policy on the life of the business owner, it is important that the premium payor, owner and beneficiary all be the same entity to avoid negative tax implications. If the policy contains cash values, it should be held in a holding company. In the event of death, the business owner’s estate or surviving spouse can receive the death benefit.
Read our article on corporate-owned life insurance.
Insured Retirement Plan
The I.R.P. is a concept that involves a business owner leveraging their corporation’s permanent life insurance policy, typically participating whole life with significant cash values, for a loan with a 3rd party lender. If structured properly, this loan can be offered on a tax-free basis to the business owner, providing retirement income or funds to use as the owner sees fit.
Read our article on the Insured Retirement Plan here.
Corporate Asset Transfer Plan
The C.A.T.P. is commonly used for business owners nearing retirement/succession from their business. The concept is to reallocate corporate passive assets, such as a non-registered investment portfolio, into a permanent life insurance policy. On death, the insurance proceeds will be paid to the corporation (usually the holding company) and can then flow out to the owner’s estate or spouse. With proper planning and setup, most or all of this death benefit can be paid tax-free via the Capital Dividend Account. The end result of this plan is essentially converting taxable corporate assets into tax-free insurance proceeds. The tax savings with a well-executed Corporate Asset Transfer Plan are significant.
Immediate Financing Arrangement
The I.F.A. is for business owners who have a need for permanent life insurance, but do not want to sacrifice any liquidity in their business. After being approved for a life insurance policy with maximum early cash values, the policy is immediately leveraged with a 3rd party lender. Additional collateral will be required, but the business can receive most or all of the premium back. This is a complex strategy.
Split-Dollar Critical Illness Insurance
Business owners have a lot on their plate, so when proactive tax planning and risk management strategies can be combined, it is worth considering. Integrating a valuable form of health insurance with the potential to extract funds out of your corporation on a tax-free basis? Split-dollar critical illness insurance is a concept every business owner needs to look at.
Read our article on split-dollar C.I.
Shareholder Agreements: Buy-Sell Funding
What is your business worth if you are no longer there to run it? If you have partners in the business, what will happen if one of them suddenly exits the business or their spouse now has control of their shares? Every shareholder agreement should outline the scenarios for handling the purchase or sale of shares, called buy-sell provisions, and insurance is often the ideal mechanism to facilitate this.
Read our article on buy-sell funding.
Group Benefit Plans
We design and implement customized health and dental plans for businesses of all sizes. We work with our clients to secure competitive rates and strive to limit the dreaded premium increase on renewal. Recent studies have shows employees are more concerned than ever about a well-rounded benefit plan – don’t fall behind your competitors by having a lackluster or non-existent benefit plan.
Read our article on benefit plans.
Health Spending Account
There are various names for this product (Private Health Services Plan is commonly used) but the ones we set up are referred to as Health Spending Accounts. This is an alternative to a traditional, premium paying employee benefit plan offered by an insurance company. There are criteria that must be met to be eligible for a Health Spending Account but they can be a great option for small businesses.
Read our article on Health Spending Accounts.
Key Person Insurance
What would happen to your business if your top employee was no longer able to come to work? The answer is, income would undoubtedly suffer. Key Person Insurance is designed to help businesses offset lost income directly related to losing the services of a crucial employee or member of the company. This absence can be caused by injury, illness, or death. This provides funds for the business to hire or train a replacement and keep the lights on while adapting to the new reality.
Read our article on Key Person Insurance.
Wage Loss Replacement Plan
This is a form of income replacement for the business owner when multiple lives are insured under one plan. For tax reasons, this might be a desired alternative to a personally-owned income replacement plan. This can also be addressed in a group benefit plan.
Business Overhead Expense / Loan Protector
Just because a business owner is unable to work does not mean the expenses do not stop. Rent, wages, memberships, debt servicing and subscriptions are just some of the ongoing overhead a business faces in the day-to-day operations. Business overhead expense insurance provides funding to a business to cover those ongoing expenses in the event of an injury or illness to the business owner. A similar concept is also available to cover loans and other debt. The premiums are a tax-deductible business expense.
Individual Pension Plan
An Individual Pension Plan, or IPP, can be viewed as a corporate RRSP. IPP’s are a defined benefit pension plan for shareholders of a private corporation. If you are between the ages of 45 and 65, pay yourself a salary (T4 income) consistently over $100k/year, and have maximized your RRSP contributions, an IPP may be a great option for you.
Read our article on IPPs.
Investment Accounts
We work with clients who use their corporation’s to hold investment assets, or advise and oversee our business owner clients who choose to pull money from the business and invest within registered accounts.
We offer customized investment solutions across all Registered Accounts (RRSPs, TFSAs, etc.) and Non-Registered (Cash) accounts.
Investments
We are compensated for our investment services in one of two ways:
Life & Health Insurance
We are compensated in the form of a sales commission directly from the insurance company for which we place our client’s business with. There is no exchange of funds between the client and First Oak Financial as it pertains to the sale of a life or health insurance policy. The commission we receive does not impact our insurance recommendations whatsoever – we have a fiduciary duty to act in the client’s best interest and we strictly adhere to that.
Financial Planning
Our fees for retirement, legacy or financial planning start at $1,000 (tax inclusive) and will ultimately be based on the complexity of the client’s situation. We provide a fully transparent quote prior to commencing any billable work.
Some of the concepts listed above involve high-level legal and tax planning. Our team will work with your professional advisors (if applicable) to ensure all parties are on the same page and working as a cohesive unit when implementing insurance-based corporate planning solutions. We can refer you to tax and legal advisors if you do not have any.