Tax Strategies

Practice Area Overview

The tax strategies and planning group provides comprehensive tax advice on a wide range of domestic matters. Our clients include public and private companies, as well as individuals and trusts, engaged in a variety of business and investment activities. Jettisoning the passive role played by the traditional tax lawyers and chartered accountants, our tax group focuses its creative energies on the development of tax-advantaged structures for complex business deals and the identification of practical solutions to difficult tax problems. We best serve our clients by keeping members of the tax group actively involved in all stages of our clients' business matters, whether it is negotiating an acquisition term sheet or drafting a litigation settlement agreement. The results of this proactive approach speak for itself. Over the years, clients of the firm have realized millions of dollars in tax benefits because of the tax group's early and continuous involvement in transactional, planning and tax controversy matters. 
 
For example, the tax group has assisted clients in structuring hundreds of taxable and tax-free domestic and international transactions involving millions of dollars. These include stock and asset acquisitions, mergers, reorganizations, corporate combinations, estate freezes, entity formations and conversions, restructurings, joint ventures, asset dispositions, split-ups, and spin-offs. The tax group routinely employs its senior experience and judgment to engineer exit and asset disposition strategies, to design equity-based compensation plans for both corporate and "pass-through" entities, to devise business succession plans for private business entities, to implement estate tax and asset protection plans, and to provide clear and concise advice about some of the most complicated technical issues in the Canadian Customs and Revenue Agency. In each case, the representation is undertaken with the goal of maximizing legitimate tax benefits available. 
 
In each case, members of the tax group combine experience with a devotion to technical proficiency to provide creative yet pragmatic solutions to our clients' problems. Time and again, members of the tax group prove the value of quality professional judgment and dedication to problem-solving initiatives (as opposed to less valuable issue spotting), whether it relates to considering tax and structuring issues in a transactional practice, establishing a charitable remainder or offshore investment trust, forming a family limited partnership or private foundation, or defending a client's reporting positions in a bitterly contested tax controversy matter.
 
In addition to the foregoing, the tax group provides advice in the following areas:
 
Structuring taxable and tax-free mergers and acquisitions
Disposing of assets, stock, and other property interests
Tax planning for start-up and other venture-backed companies
Taxation of "pass-through" entities, including general and limited partnerships, limited liability companies
Tax minimization and wealth transfer strategies (including use of tax rate arbitrage, income deferral mechanisms, charitable remainder trusts)
Business succession strategies for closely-held businesses
Estate, gift, and charitable tax planning for high net-worth individuals
Designing compensation arrangements
Advising public charities and other non-profit and tax-exempt institutions

Financial Strategies

Have you mapped your course for this year? Thought about what you want to achieve this year and beyond? Creating a plan, and sticking to it, will help you realize your personal and financial goals. Your A.M. Burgoyne Insurance Associates advisor can walk you through the process of collecting and analyzing your personal and financial data, identifying your goals and objectives, and creating and implementing an action plan. Ensuring that your plan is reviewed and updated regularly completes the planning process.
 
Financial Planning
A.M. Burgoyne Insurance Associates advisors work closely with their clients to develop and implement financial plans. We recognize that each client, family or business has its own unique set of goals and objectives. These specific circumstances drive the customized financial plan we create for each client, and that plan may include elements from various planning areas. 
 
Below is a brief description of the six principal different planning areas addressed by our advisors:
 
I. Cash & Debt Management One of the foundations of good financial planning is determining the best use of cash and debt. Your advisor will assess your existing cash and debt situation, and offer a recommendation as to the most efficient use of your cash, and whether or not your debt is most optimally structured. Your advisor can also assist you in developing a personal budget, if required.
 
II. Investment Planning How your investments are structured will, in part, determine your tax situation, your risk exposure and the potential return on your investments. Your portfolio will be assessed, and recommendations will be made based on, among other things, your objectives and risk tolerance. Asset allocation will be discussed, and your advisor will suggest alternative investments to you, as appropriate for your situation.
 
III. Retirement Income Planning Personal retirement savings, employer pension plans, non-registered investments, CPP and OAS generally form the basis for most individuals’ retirement income. All of these areas will be addressed, and recommendations will be made based on your retirement goals, your current and possible future tax status, your family situation and your risk tolerance. Our advisors will consider the integration of government-sponsored income plans with your personal portfolio in order to structure your retirement income in the most efficient manner possible.
 
IV. Risk Management/Insurance For many people, protecting their family and assets is of utmost importance. Your advisor will analyze your protection needs, assess any existing programs you may have, and advise you of areas requiring attention. These areas may include life insurance, key person insurance (should you be a business owner), disability insurance, critical illness insurance, long-term care coverage and extended health insurance.
 
V. Estate Planning Ensuring the orderly transfer of a client’s estate to his or her beneficiaries usually forms a substantial part of that client’s financial plan. Our advisors are knowledgeable about the tax laws governing the transfer of investment and other assets at death, and can advise you as to the most favourable manner in which to structure your current holdings. If required, you will also be advised on the subject of “living wills” and powers of attorney, and can be referred to a lawyer for more detailed estate planning at your request.
 
VI. Business Continuation & Succession Planning Most business owners want to know that, in the event of their death or disability, their business will either (a) continue to operate smoothly under new management/ownership; or (b) will cease operations and an orderly transfer of assets to beneficiaries will occur. Careful tax and investment planning will assist you in meeting your personal objectives for the future of your business. 
 
Our advisors are committed to looking at the big picture. Although, based on your circumstances, some of the areas noted above may not become part of your customized financial plan, each area will be discussed.

Group Benefits

Companies typically offer group insurance to their employees on an insured basis with the objective of:
Minimizing business risk for the employer
Stabilizing their benefit costs
 
In today’s business environment, it is becoming increasingly more difficult for companies to avoid increasing costs associated with employee benefits provided through insurance companies. Typically, the benefits that are provided are; life insurance, accidental death and dismemberment, dependent life insurance, health, dental, weekly indemnity, long term disability and critical illness insurance.
 
The following factors have attributed to escalating employee benefit costs on an insured basis:
 
  • Less Competition due to consolidation in the industry.
  • Shareholders are mandating a 15% ROI to insurance companies.
  • The less profitable lines of business have to increase costs. Traditionally benefit lines have operated on low margins, we are seeing this disappear.
  • Drug costs are rising. The annual inflation (Trend) factors that insurers utilize are between 15 – 21%.
  • Incurred claims are used to calculate renewals. Typically this is 4-5% higher than the actual paid claims.
  • A utilization factor of approximately 2.5% is then factored into the equation.
 
Option: Self Insured Benefits Program
 
The objective of self insurance is to reduce costs to an employer for those benefits that have predictable experience. Extended health, dental and weekly indemnity are the three benefits that for the most part are predictable. Therefore self insurance is only used for these benefits with the other core benefits being provided on an insured basis.
 
Self insurance (also known as self funding and ASO) is becoming more popular to companies with more than 65 employees. Historically this area of benefits was the domain of large multi national employers. However with the evolution of Stop Loss Insurance, smaller companies have been able to self insure while still maintaining protection against any catastrophic loss. Self funding is only used for health benefits, dental benefits and weekly indemnity.
 
Self insurance allows for the employer to set aside monthly contributions and accordingly have claims paid from this pool along with the administrative expenses. Our administration charges are dramatically lower than insurances companies as we charge these expenses on a paid basis rather than an incurred basis. We also do not factor in utilization factors, or trend factors that are in excess of the Stats Can figures. All in all this enables an employer to continue to provide employee benefits, while controlling the costing of the same.
 
Through A.M.Burgoyne Insurance Associates Inc. and our Third Party Administrator we are able to offer self insurance, plus pooled insured coverage without placing more risk onto the employer. We maintain relationships with all of the major insurance companies, and utilize them for the life, AD&D and other pooled benefits. We have an allegiance with BCE Emergis, whom provide the drug cards. The transition to this type of a plan is painless and seamless to the employees. You will receive access to on line reporting and administration tools. 

Group Planning

Group RRSPs: The Extra Edge

Request a free Investments Group Pension price quote
 
Among the many Canadians who have displayed the foresight to contribute to an RRSP, there is a growing segment of even more fortunate individuals: those who are enjoying several additional valuable benefits because they have chosen to participate in a Group RRSP through their employer.
 
Group RRSP Basics
 
A Group RRSP is simply a collection of individual RRSPs where the employer arranges for employees to make contributions through regular payroll deductions on a pre-tax basis. Upon completing the application form and deciding how much you want to contribute, your employer deducts that amount from your pay in a pre-tax dollars as permitted by Revenue Canada and forwards it to the financial organization selected by your employer as the investment manager and administrator for the group plan. Your contribution is then deposited into your individual RRSP and invested as you specify.
 
No matter how satisfying it may be to get a tax refund from Revenue Canada, getting one means you gave the government an interest-free loan. With a Group RRSP, contributions are made on a pre-tax basis by payroll deduction, so the amount of tax your employer is required to deduct at source is calculated after your Group RRSP contribution is deducted, resulting in an instant tax saving. In other words, you will not overpay your taxes during the year and then have to wait until your income tax return is processed to receive a refund.
 
So why over-pay your taxes and then wait for a refund from the government? A Group RRSP will cut your taxes instantly at source and give you that money as extra take-home pay to spend or save as you see fit.
 
The above table compares an employee who contributes to a Group RRSP to one who does not.
 
For every $300 monthly contribution to a Group RRSP, take home pay is reduced by only $226 because the tax deducted at source is $74 less ($443-$369)
 
In effect, each dollar invested in a Group RRSP will cost this employee only 75 cents (cost will vary according to your salary, amount of contribution, province and personal situation).
 
The $74 difference, when multiplied by 12, equals the tax refund normally received in the following year – assuming the employee saves $3,600 ($300×12) in after tax dollars during the year and deposits it in a single lump sum into a regular RRSP at the end of the year.
 
Additional Group Benefits
In addition to the instant tax savings, a Group RRSP also offers the following benefits of contributing by installment:
 
Payroll deduction offers the ultimate convenience; It is the easiest way to save.
Avoid the last-minute RRSP rush at the end of February.
It's easier to reach your RRSP limit that with a single lump-sum contribution at the end of February.
Contributing earlier maximizes the value of your savings by keeping them tax-sheltered longer than year-end lump-sum contributions.
It eliminates the need to borrow money from a bank to make an RRSP contribution, thus saving interest costs.
 
Deferred Profit Sharing Plan (DPSP)
DPSP's can be used as a pension plan or as a supplement to a company's Group RRSP. Like a registered pension plan, a deferred profit sharing plan must be registered with Revenue Canada and must comply with the terms and provisions of the Income Tax Act and regulations.
 
The employer may contribute an amount "out of profits," or related to profits, into a trust fund that will accumulate sheltered from income tax. The employer's contributions are tax deductible and are not taxable to the employee until paid out. Employee contributions are not permitted.
 
Employer contributions into a DPSP are limited to the lesser of 18% of the employees compensations of the year from the employer or a dollar limit equal to one half of the defined contribution pension plan limit as follows:
 
1998 through 2002 – $6,750 2003 – $7,250 2004 – $7,750 2005 indexed
 
Amounts allocated to a member's account must vest to the member after two years of membership in the plan, or earlier if the plan allows for it. Any non-vested amount forfeited by a terminating employee must either be allocated to other plan members or refunded to the employer no later than the end of the year following the year in which the amount was forfeited.
 
A DPSP may give members the right to withdraw vested benefits from the plan at any time. However a member's vested benefit must be paid no later than 90 days after the earliest of: 
 
If the member is vested, Mackenzie allows for a $500 withdrawal per calendar year
Death of the member
Termination of the employment of the member
Attainment of age 69
Termination of the plan
 
Highlights
No minimum employer contributions
Employer contributions are not subject to payroll taxes
Only employer contributions are permitted into the plan
The employer may impose a vesting period of up to 2 years
Withdrawals can be restricted to termination, death and retirement
Owners or relatives of owners cannot participate in the plan
Terminated employees can withdraw the full vested amount subject to taxation
Creates a pension adjustment
Can be used to share profits with employees or as a pension plan
 
Defined Contribution Registered Pension Plans (DCPP's)
DCPP's are formal arrangements made by a sponsor in order to provide employees with a monthly income on retirement. Legislation requires the employer to contribute to the plan. If the employee is also required to contribute, the plan is referred to a s a contributory plan, otherwise it is a non-contributory plan.
 
Highlights
The employer may impose a vesting period of up to 2 years
The contribution formula is clearly defined (minimum employer contribution is 1% of YMPE)
After the contributions vest, all monies are locked-ion
Employer contributions are not subject to payroll taxes
Legislation states that voluntary contributions are allowed to be redeemed. However, employers have the option of locking in all contributions
Plans are creditor proof
Low administrative costs
The employer is responsible for the plan
Creates a pension adjustment
 
Combination DPSP/ Group RRSP
This type of arrangement allows you to take advantage of the features of both plans.
 
The employer contributions are made to the DPSP while employee contributions are made into the Group RRSP. The employer contributions can be made contingent upon the employee contributing into the Group RRSP. 
 
Highlights
No minimum employer contributions
Employer contributions to the DPSP are not subject to payroll taxes
The employer may impose a vesting period of up to 2 years on the DPSP only
Withdrawals can be restricted to termination, death, and retirement on the DPSP
Owners or relatives of owners cannot participate in the DPSP portion
Terminated employees can withdraw the full vested amount subject to taxation
The DPSP creates a Pension Adjustment
The DPSP can be used to share profits with employees or as a pension plan
Employer and employee contributions can be made in any combination but cannot exceed an individual's personal RRSP limit
 

Insurance

Types of Insurance

Meeting the needs of our clients' estate planning and risk management objectives often involves the use of insurance products. Today, more than ever, there is a wide range of insurance programs tailor-made for specific protection needs.
 
Please contact your financial advisor or make a general inquiry should you wish additional information about how these programs might be integrated with your personal risk management or estate plan. 
 
Life
In its simplest form, life insurance is meant to provide safety and security for the ones we love.
 
This type of insurance is commonly used to:
 
– Cover last expenses and immediately provide cash for surviving family members
– Pay off mortgages and other debts
– Eliminate tax liabilities triggered at death
– Replace lost income for the surviving spouse and dependent children
– Provide education funds for children
– Provide a charitable testamentary gift
 
In addition to meeting personal planning needs, life insurance can also play a large role in addressing business risk management and succession planning.
 
Disability
Disability coverage is meant to replace the earned income that is lost when illness or accident causes a prolonged disability. It is often a neglected personal insurance need, yet it is a crucial part of overall risk management planning for most individuals. Businesses may also suffer a loss due to the long-term disability of a key employee.
 
A wide range of different disability plans are available today, and can be custom-designed to meet a variety of protection needs. 
 
Critical Illness
Critical Illness insurance provides a one-time lump-sum cash payment if the insured is diagnosed with a life-threatening illness (such as cancer, kidney failure or Alzheimer's) or has suffered a heart attack or stroke. At a time when extra financial peace of mind is welcome, these funds can be used by the insured in any manner – such as facilitating day-to-day living, or funding private health care. 
 
Long-Term Care
Long-term care insurance provides a regular cash benefit to assist with the costs of long-term medical care (either in a facility or at home). This type of plan may be an ideal solution for those who are concerned about relying on family members to provide care, or to ensure that you can pay for the care at the facility of your choice.