Background
Michael is a 40-year-old doctor who has been practicing medicine for several years. Over the last few years Michael has finished paying off his student loans and has seen his income increase. After a discussion with some of his colleagues who have incorporated, he is wondering whether incorporating his practice would be beneficial. Michael is in a common-law relationship with Tina, who is 35 years old and works with the Federal government as an IT analyst.
Discovery
Michael came to us with one key question: whether to incorporate his medical practice. However, through our discovery conversations with Michael and Tina, we identified other significant financial planning considerations to discuss. It was important to not only understand Michael’s business goals, but also Michael and Tina’s goals as a family. We learned that:
- Michael expected his income to continue to increase, while anticipating his personal expenses to decline now that all his student loans had been repaid.
- Tina has a 5-year-old son, Patrick, from a previous relationship. Patrick qualified for the disability tax credit.
- Neither Michael nor Tina had considered estate planning yet and didn’t have wills or any other estate planning documents.
Building an IG Living Plan to help Michael and Tina
Explore different business incorporation and lifestyle scenarios
- We walked Michael through the benefits and costs associated with incorporation.
- We explained how the tax benefits of incorporation are directly correlated to his ability and willingness to retain a portion of the income generated by his practice within the corporation for investment.
- As Michael is earning more than is needed to fund his family’s lifestyle expenses, we were able to develop an IG Living Plan to illustrate the long-term benefits of incorporation, including tax deferral, capital accumulation and retirement income, under different scenarios.
Clarify blended family estate planning considerations and roles
- Raised important issues and questions to consider when in a blended family, that is one where one or both spouses/partners have children from a previous relationship.
- Reviewed the role that Powers of Attorney (for finance and personal care, or protection mandate in Quebec) play in the event someone becomes incapacitated and is unable to make their own decisions.
- Helped clarify and document their estate goals in preparation for their meeting with an experienced estate planning lawyer (or notary in Québec) to prepare their wills and powers of attorney.
Clarify the notion of common-law (de facto) partners (Québec only)
- In Québec, in the event of a separation, common-law partners don’t have the same rights under the Québec Civil Code as married or civil-union couples. Therefore, we discussed the benefits and purpose of creating a common-law partners written agreement.
Prepare an insurance needs analysis with IG insurance specialists
- Discussed the financial consequences of premature death, disability, or a critical illness, and reviewed Michael and Tina’s current risk protection plan.
- Illustrated how permanent insurance can play an important role in wealth accumulation and estate preservation.
Establish a Registered Disability Savings Plan (RDSP) for Patrick
- As Patrick qualifies for the disability tax credit, we discussed the benefits of establishing a Registered Disability Savings Plan (RDSP) for Patrick, including availability of government grants. We integrated these contributions into their IG Living Plan.
Finally, in addition to helping Michael and Tina see the big picture of how their business needs and personal goals are connected, our IG team collaborated with Michael and Tina’s other professional advisors to ensure we created a financial plan that was consistent with the advice they received from their accountant and lawyer (or notary in Québec).
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DISCLAIMER: For illustrative purposes only. All situations described above are hypothetical and based on various client situations. Any similarity to any one individual person(s) is purely coincidental.
Written and published by IG Wealth Management as a general source of information only. Not intended as a solicitation to buy or sell specific investments, or to provide tax, legal or investment advice. Seek advice on your specific circumstances from an IG Wealth Management Consultant. Insurance products and services distributed through I.G. Insurance Services Inc. (in Québec, a Financial Services Firm). Insurance license sponsored by The Canada Life Assurance Company (outside of Québec).