Million Dollar Journey

Building Wealth through Saving and Investing

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Estate Planning for a Family Business using the Tax Free Spousal Rollover

One topic that I’ve been thinking more about lately is estate planning.  It’s a pretty morbid topic and most would rather avoid the topic altogether.  However, poor estate planning can lead to a much higher tax bill than neccessary.  While I’ve written about preparing a will, testamentary trusts and even living trusts, I’ve never really touched on the topic on the sucession and tax planning of transferring a family business upon death.

For business owners, the succession of their business is something that can keep them up at night.   Besides the obvious challenge of finding a buyer and/or successor, there are tax implications for the immediate family such as capital gains tax. The good news is that if you are a business owner and you have a spouse or common law partner, the shares that your own can “rollover” to your spouse on a tax free basis.

Spousal Rollover

In this provision that is triggered in an established will,  when you leave your appreciating assets to your suriving spouse, no capital gains tax will result at the time of death.  However, this is tax deferral where capital gains tax would be owed when the surviving spouse either disposes of the assets or passes away.  As a refresher, capital gains tax is triggered when an appreciating asset is sold (outside of registered accounts).  Once sold, 50% of the capital gain or profit is added to your income for the year and taxed accordingly.  The other half is tax free, so in total, the maximum capital gains tax payable is 25% of the capital gain.

There are a number of rules to be followed to ensure that the spousal rollover is available to the estate.  You will need to consult a professional to set this up, but the rules basically state that the assets must be transferred, in its entirety, to the spouse.  If transferred to a trust, the spouse must control the trust and entitled to receive all income from the trust during their lifetime.  Another caveat is that the property must be transferred to the spouse within 36 months of death.

Spousal Trust

Now that your spouse has your company shares tax free, now what?  What about the situation where your spouse remarries but passes away prior to his/her new spouse?  If your spouse did not update his/her will, then the estate would go into intestate where the government decides where to allocate assets.

This also means that there is a possibility that your company shares can be transferred to someone you don’t know!  This is where a spousal trust can help. A spousal trust acts as a separate entity with a beneficiary, in this case, your spouse.  The upside of using a spousal trust is that your assets, or company in this case, stays in the family and not at risk if your spouse remarries.  Your spouse would receive all income generated from the trust but does not technically own the assets.

Estate planning where significant assets are involved can get quite complicated and consulting a professional is highly recommended. If you have any added tips, please add them to the comments.


How to Start Making Money with YouTube

One of the oft-written about topics on financial blogs involves ways to save money. Saving money is certainly one piece of the ‘earn more and/or spend less’ mantra. Supplementing one’s primary income with part-time gigs/ventures can provide a fillip to stretched budgets and/or offer additional contribution to savings/investment accounts.

With the ubiquity of the Internet, content creation and monetization is a path that may provide some additional income for people who can create and display their craft. One popular channel (pun intended) for posting and monetizing content is YouTube. But how does one get started with monetizing their videos?

Content Production and Display on YouTube

The type of content that will make money also needs to be one that the creator is knowledgeable and passionate about. It is easy to fall prey to creating content that will yield maximum page views. From a monetary standpoint, this may provide the best return but it could become tough to sustain the channel after the initial excitement wears off.

It is essential to find a topic/area that balances the knowledge level of the creator with possible cash flow from the video site. Posted content could be a video blog promoting merchandise (e.g., a person making stained glassware and selling them on websites such as Etsy and eBay could use YouTube to show off their products and lead viewers to their page on those sites), beauty-oriented (makeup, hair, etc.) tips, sneak peek into a music single/album that a relatively new artist/band has come out with, etc.

As with writing blogs, uploading videos regularly will help build an audience, which, in turn, will (hopefully) lead to a subscriber base. It is important to create a presence on other social media websites such as Facebook and Twitter to spread the word. Irrespective of content, viewers connect better when the content producer is responsive to relevant comments and takes requests.

The Monetization Piece

Once a subscriber base has been established, the content producer can monetize through YouTube or simply use the video as a channel leading to their online store elsewhere.

If a producer is interested in making money through YouTube, then participating in the YouTube Partner Program is a good place to start. The YouTube Partner Program offers content producers the tools and programs to develop their skills, grow their audience and monetize their videos. Becoming a partner would allow YouTube to display ads in the posted video that would bring in revenue. Earning money and receiving payments through this program requires the creator to link an AdSense account to their YouTube account. In addition, the producer will have to agree to not click on their own ads to boost revenue and not post another creator’s copyrighted material. Comprehensive details and support can be found on this page.

Have you used YouTube as a tool to make money on the side? If so, do you have any tips for fellow readers who might be interested in (or starting out with) a business venture? Are there other tools that they can employ to boost their online presence?

About the Author: Clark works in Saskatchewan and has been working to build his (DIY) investment portfolio, structured for an early retirement. He loves reading (and using the lessons learned) about personal finance, technology and minimalism. You can read his other articles here.

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  • SC: Hey Ed, I have started the SM and have run into something I didn’t see coming. For my HELOC from Scotia...
  • FrugalTrader: Wouldn’t assets transferred to a spouse via rollover be exempt from probate?
  • James: The most simple and overlooked tax strategy for business owners is the dual will. By having a secondary will...
  • James: Great Article. I am a Financial Planner for a large FI. Patricia..there is no free lunch. I used to work for...
  • JT: Thanks, Ed. That is what I suspected. JT
  • Ed Rempel: Hi JT, You have to be careful taking out the growth. In your example, you sell $20,000 and 5/6 of that is...
  • Ed Rempel: Hi K, A couple things: 1. Leveraged investing is a high risk strategy. If your risk tolerance is only at...
  • Loonie Lover: Just on the subject of dotting the “i”s and crossing the “t”s, don’t...
  • Brief summary: Spouse gets everything when I die :). Seriously, my planning goes like this....
  • Jeff Guarino: The explanation is all wrong. My commuted valued continues to go lower as I get older. I can retire at...

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