Top 5 Tax-Efficient Wealth Transfer Strategies for Canadian Business Owners
Let’s look at the Top 5 Tax-Efficient Wealth Transfer Strategies.
Without proper planning, estate taxes and capital gains can erode the value you’ve worked so hard to build.
At Eagle Wealth Partners, we specialize in helping Canadian entrepreneurs preserve, protect, and pass on their wealth — efficiently and in alignment with their legacy goals.
1
The Estate Freeze
An estate freeze allows you to lock in the current value of your business shares, transferring future growth to your heirs or a family trust.
This strategy is ideal for business owners planning succession while maintaining control.
Tax benefit: Future capital gains accrue to the next generation, reducing your personal estate’s taxable exposure.
When it’s useful:
Preparing for retirement.
Introducing adult children into ownership.
Creating long-term estate liquidity.
2
Using a Family Trust
A discretionary family trust can hold company shares for family members while giving you control as the trustee.
It’s one of the most flexible tools for wealth transfer and income splitting (within CRA limits).
Tax benefit: Income and capital gains can be allocated among beneficiaries, reducing the overall tax rate and facilitating smooth intergenerational transition.
Key advantage:
Trusts provide confidentiality and continuity even after the original owner’s passing.
3
Leveraging Corporate-Owned Life Insurance (COLI)
Corporate-owned life insurance can fund future tax liabilities, such as capital gains or buy-sell obligations, while offering tax-advantaged growth.
Tax benefit: The Capital Dividend Account (CDA) allows death benefits (less the policy’s ACB) to be distributed to shareholders tax-free.
This ensures liquidity to pay estate taxes without selling business assets.
Strategic uses:
Equalizing inheritances among heirs.
Funding buy-sell agreements.
Estate equalization for blended families.
4
Charitable Giving Strategies
Charitable donations can be structured to create both philanthropic impact and tax advantages.
Through Charitable Remainder Trusts (CRTs) or gifts of publicly traded securities, you can support causes that matter while reducing taxable income or capital gains.
Example: Donating appreciated stock eliminates capital gains tax on that growth, and the donation credit reduces personal tax payable.
5
The Use of Holding Companies
A Holding Company (HoldCo) can help manage passive investments, protect retained earnings, and support succession planning.
By reorganizing shares between OpCo and HoldCo, you can separate business risk, defer taxes, and control distributions more effectively.
Tax benefit: Holding companies help defer personal taxes until funds are withdrawn, while allowing inter-corporate dividends to flow tax-free between connected corporations.
Additional Tips for Business Owners
Start early — wealth transfer planning works best when initiated before retirement.
Revisit your plan annually to adapt to changes in tax legislation or family structure.
Combine insurance, trust, and corporate tools for maximum tax efficiency.
Conclusion
Build a Legacy That Lasts
Each of these strategies offers unique benefits, but the best approach depends on your company structure, family dynamics, and long-term vision.
Our advisors at Eagle Wealth Partners help entrepreneurs design integrated plans that minimize taxes and ensure continuity for the next generation.
Ready to plan your legacy?
Eagle Wealth Partners
Markham, Ontario, Canada
+1 647 289 4847
sami@theabccanada.com