The following client story is real, but certain details have been changed to protect their privacy.
Arthur and his wife Elizabeth have been clients of ours for several years now. He is a senior executive at a mid-sized but growing company, earning a six-figure salary and she is taking a few years off work to raise their children.
When Arthur first became a client he was being paid a salary by his employer, but after assessing his situation we recommended that he form a Personal Services Business, which does not have access to the small business tax rate but still provides excellent opportunities for tax minimization.
With the structure in place, Arthur was able to defer more than 15% tax on income not needed for living expenses, which resulted in annual tax savings of more than $18,000 — money he used to accelerate his wealth building.
Arthur will be retiring in a few months, and his Personal Service Business will be receiving a $500,000 retirement bonus. We helped Arthur to set up an Individual Pension Plan (IPP) several years ago, which has provided many years of tax savings. Through a strategy called “IPP Terminal Funding” Arthur’s corporation can contribute the full $500,000 to his IPP as a single contribution, deferring all taxes payable on his bonus.
This strategy will allow Arthur to defer an additional $140,000 in taxes, and allows him to invest the full value of his retirement bonus in a tax-sheltered pension.
Arthur and Elizabeth are comfortably enjoying their retirement and have told us that our guidance, advice, and tax planning is what made it possible.