Written by Ron Cooke, President & Founder of Strategic Wealth Protection Partners in Ontario, CEA®, Member of the Estate Planning Council Canada
Michael* came to me at age 67 looking for a way to transfer a rental property to his son while reducing future estate taxes.
He was widowed, semi-retired, and had spent decades building significant wealth through real estate, investments, and private corporations.
In addition to a rental property carrying a substantial unrealized capital gain, Michael had approximately $1 million in RRSPs and corporate investments with an estimated future taxable gain of approximately $2 million.
His primary concern was ensuring that more of his wealth would ultimately pass to his son rather than being lost to taxes.
Summary of Key Points
- Challenge: An Ontario real estate investor wanted to transfer a rental property to his son while reducing the future tax burden on his estate.
- Strategy: An estate freeze was used to lock in the property’s current value and move future growth outside of his estate through a corporate structure.
- Additional Planning: Permanent life insurance was added to create tax-efficient liquidity to help fund future tax obligations arising from the rental property, RRSPs, and corporate investments.
- Outcome: The strategy is projected to save the family more than $1 million while preserving significantly more wealth for the next generation.
- Collaborative Approach: The estate freeze, corporate structure, insurance strategy, will, accountant, and lawyer were all coordinated through SWPP’s Living Estate Plan process to ensure every part of the plan worked together.
The Challenge
Michael’s rental property had an unrealized capital gain of approximately $1 million.
He was concerned that future growth on the property, taxes arising from his RRSPs, and future corporate tax liabilities could create a significant tax burden on his estate. Without proper planning, a substantial portion of the wealth he had worked so hard to build could be lost before reaching the next generation.
The Strategy
Working closely with Michael, his accountant, and his lawyer, we designed a strategy to help defer taxes, reduce future estate growth, and create liquidity for future estate obligations.
The strategy included:
- Implementing an estate freeze by rolling the rental property into a corporation.
- Structuring ownership so future growth on the property would accrue outside of Michael’s estate.
- Deferring the existing capital gain until a future disposition or death.
- Establishing permanent life insurance inside his holding company.
- Using the policy’s cash value as collateral to support a corporate investment loan strategy.
The Outcome
The strategy significantly reduced the future estate tax exposure associated with the property.
By freezing the value of the rental property and shifting future growth outside of Michael’s estate, the future tax liability was reduced.
The permanent life insurance was designed to provide tax-efficient liquidity that could help offset taxes coming from the rental property, RRSPs, and corporate investments. Compared to maintaining the existing structure, the strategy is projected to provide over $1 million in potential estate tax savings while preserving more wealth for Michael’s son.
The Living Estate Plan Process
As part of our Living Estate Plan process, we coordinated with Michael’s accountant and lawyer to ensure all aspects of his planning worked together.
Because Michael implemented the life insurance strategy through our firm, there were no separate fees for the estate planning analysis, strategy development, or collaboration with his professional advisors.
Today, Michael’s estate plan, corporate structure, insurance strategy, and will are fully aligned and working together toward the same goal: preserving more of his wealth for the next generation.
*Names and identifying details have been changed to protect the privacy of SWPP’s clients.
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Avoid the Biggest Wealth Killer in Canada
Taxation is the biggest wealth killer in Canada.
If you’ve worked hard and built substantial assets, then it’s frustrating to know that 50% or more of your assets will go to the government when you die.
That’s where SWPP can help.
We create estate planning and life insurance strategies designed to secure your family’s legacy and preserve generational wealth.
But planning your legacy is about more than numbers. It’s about ensuring your family remembers you and your values are honoured for many years to come.
Estate planning, life insurance, and generational wealth planning can be confusing and complex.
With our comprehensive Living Estate Plan process, we make it easier for you. We’ll do a full assessment and walk you through all of your options including trusts and insurance.
From there, you can take action knowing what the real numbers are and how they’ll affect your family and your wealth.
Read More
If you’re considering life insurance for estate planning, you may find these articles helpful:
- Case Study: Using a Trust to Preserve a $12M Real Estate Portfolio
- When You Inherit a House in Ontario, Is It Taxable?
- How Much Is an Estate Taxed in Canada?
About the Author
RON COOKE, PRESIDENT & FOUNDER OF STRATEGIC WEALTH PROTECTION PARTNERS
With over 30 years in financial services, I’ve seen the challenges families face when a loved one passes—lost assets, unnecessary taxes, and emotional stress. That’s why I created the Living Estate Plan, a comprehensive process to protect assets, eliminate estate and probate fees, and create legacies that are remembered for many years to come.
This plan ensures your family receives not just your wealth, but a meaningful reminder of your care and love. Tools like The Final Word Journal capture your story, wishes, and essential details, offering clarity and comfort during difficult times.
Your final gift should be more than money—it should be peace of mind, cherished memories, and an organized estate.
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