As a Canadian entrepreneur, you have built substantial wealth through years of strategic decisions and sustained effort. Yet estate tax liability planning often remains overlooked until a chance conversation (or magazine article) catches your attention. This delay can prove expensive.
Upon death, Canada’s tax rules trigger a deemed disposition of assets at fair market value. A deemed disposition means the Canada Revenue Agency treats your assets as if they were sold immediately before death, triggering capital gains taxes on business shares, investments and other appreciated property.
Without proper planning, taxes, probate fees and related costs can claim up to 50% of your estate’s value. Your heirs may face significant financial strain and uncertainty during an already difficult time.
A well-structured estate plan preserves your legacy and minimizes these risks, ensuring a smoother transition for your loved ones. Effective implementation requires time, often several years. The ideal moment to prioritize estate liability planning is now.
Reviewing Your Corporate Structure
With your business established and wealth accumulated, a comprehensive structural review is now essential. Consider whether your operating company holds passive assets like excess cash or investments. These assets can contaminate your qualified small business corporation (QSBC) status, potentially disqualifying you from valuable tax benefits.
In 2025, the lifetime capital gains exemption allows sheltering up to $1.25 million in gains on QSBC shares. This amount is generally indexed to inflation annually. Maintaining QSBC eligibility represents a powerful tool for tax-efficient business exits or succession planning.
Your review should evaluate whether your current structure:
- Supports flexibility, scalability and risk mitigation
- Facilitates future reorganizations to reduce or defer tax burdens
- Caps your estate’s value and shiftsfuture growth to heirs
- Aligns with shareholders’ agreements
Understanding Multi-Layered Taxation
Many entrepreneurs focus exclusively on minimizing current taxes, believing this approach to be optimal. This overlooks Canada’s multi-layered taxation system. Business income faces corporate taxes. Distributions to shareholders incur personal taxes on dividends or salaries. At death, deemed dispositions create another tax event entirely.
This shortsighted approach can quietly erode wealth over time. For example, passive assets held within your operating company may trigger double taxation or block access to QSBC benefits.
Understanding these interconnected tax layers enables true wealth preservation and reduces uncertainty for your family.
Working with the Right Advisor
Canadian tax rules have grown increasingly complex. Federal and provincial regulations evolve constantly and each tax plan must reflect unique personal circumstances. Navigating this complexity demands specialized expertise.
Partner with a skilled tax planner who views taxation as a strategic tool for wealth preservation rather than merely a compliance exercise. They should assess your total estate liability comprehensively and incorporate planning tools like wills, trusts and insurance to optimize outcomes.
Running a successful business demands rigour and careful selection of professional advisors. Apply the same standards when choosing a tax planner. The right partner provides clarity and confidence, allowing you to focus on your business while knowing your estate plan protects what you have built.
Proactive planning prevents rushed decisions and costly mistakes while maximizing after-tax outcomes. Early action ensures your wealth is preserved as intended and endures for the benefit of your heirs.
Felicia is a Senior Tax Advisor and Founder of F. Mar Professional Corporation, Chartered Professional Accountant. She specializes in tax planning and advisory services for privately owned businesses.
