Planning ahead can often be the best mitigant for risk. We recently sat down with our partner, Daniel Clarke from Kingsmere Financial to discuss estate planning strategies. With over a decade of experience as a business owner, Daniel specializes in helping entrepreneurs and family-owned businesses map out their financial futures while protecting their legacies.
Seven Hills: What are the biggest risks that high-net-worth individuals, families, and especially business owners face when it comes to estate planning?
Daniel: For many high-net-worth individuals and families, the biggest risk is not having a detailed, coherent, and long-term plan. Success in building wealth often leads to complexity, especially as families grow and businesses evolve.
One of the most significant risks, especially for business owners, is the capital gains tax on the shares of private corporations. As their business grows, so does the tax liability, but many are unaware of this potential burden until it’s too late. This tax can significantly erode family wealth if not properly planned for.
Leaving estate planning until later in life can also lead to increased costs, and in some cases, the inability to secure insurance due to age or health concerns. It’s important to approach estate planning early, ideally with a multi-generational view.
Seven Hills: What is your approach in working with clients on beginning to think about their estate planning?
Daniel: We focus on mapping out a comprehensive plan. Additionally, we emphasize collaboration between the family and their other professional advisors - such as accountants and lawyers - to address both short-term risks and the long-term goal of preserving and passing on wealth to the next generation.
Seven Hills: Who would benefit most from using insurance as part of their estate planning strategy?
Daniel: The ideal candidates for using insurance in estate planning are individuals who’ve built a successful business that may continue beyond their lifetime. Insurance can ensure there’s enough liquidity to cover taxes and keep the business running without the need to sell assets to pay the tax bill.
This strategy is also beneficial for families with assets that could incur significant capital gains taxes - such as family cottages or real estate portfolios. The key is to implement the insurance strategy early, as this allows more flexibility in managing the future tax burden.
The sooner families start planning, the more options they have for structuring their estate and ensuring their wealth is preserved for the next generation. Insurance can also be part of a larger strategy to minimize taxes, enhance legacies, and even support charitable goals.
Seven Hills: So the sooner you start thinking about insurance and estate planning, the better. Are there any final thoughts you’d like to share with our readers?
Daniel: I would stress the importance of taking a holistic and proactive approach to estate planning. It’s not just about creating a will or a trust - it’s about understanding the potential risks and opportunities to protect your wealth over the long term.
