Smart Succession Is Possible! The Protectors Group Can Help

1. Smart Succession Is Possible!The Protectors Group Can Help • The Guide • Help Clarify Objectives • Help Organize Resources • Find Efficient Methods To Match Resources To Goals • The Motivator • Sales People Help People Make Decisions • Sales People Are Persistent • The Coordinator • Familiar With The Roles Of The Professionals Involved • Know Where The Overlaps And Conflicts Will Arise • The Communicator • Objective • Skilled At Reporting, Speaking, Presenting • Simple And Direct

2. Contact Us For A Confidential Discussion About The Possibilities Don Shaughnessy The Protectors Group 215 George Street North Peterborough, Ontario, K9J 3G7 705-748-5181 X225 don.s@protectorsgroup.com Terry Windrem The Protectors Group 215 George Street North Peterborough, Ontario, K9J 3G7 705-748-5181 X218 terrywindrem@protectorsgroup.com

3. Smart Succession Matters

4. Notice • Not everything applies to everyone • The material is intended to provide a basis for discussion with professional advisors familiar with your particular situation. • The material presented is a tiny fraction of what is important • This material is not, and should not be treated as legal, accounting, tax or business advice. • Smart Succession is not restricted to family transition only. It can also apply to a sale to employees or even to unrelated 3rd parties

5. Smart Succession Matters • To You • To Your Spouse • To Children Who Own The Business • To Your Other Children • To Employees • To Customers • To Suppliers • To The Community • To Charities • To The Government

6. 9 Elements OfSmart Succession (In Order) • Mom & Dad Have All The Money They Need • Children Can Run The Business Successfully • Business Has Capital To Grow And Prosper • Children Live Longer Than Their Parents • In-laws Are No Problem • No Unforeseen Cash Drain Arises • All The Paperwork Is Valid And Complete • The Estate Has Enough Liquidity • Estate Provides Equitable Shares For All

7. Smart SuccessionIs Tough Stuff • Some Elements Conflict • Cannot Invest & Spend The Same Dollar • Some Elements Are Not Controllable • Health, Time Of Death, Order of Death, Economy • Some Things You Know Will Change • Spending, Interest Yields, Maybe Taxes & Fees • Some Things Are Hard To Fix Later • Freeze & Thaw • Some Possible Events Are Catastrophic • Successor Child Dies First

8. Planning Helps • Minimize The Effect Of Conflicting Goals • Discover Previously Unforeseen Opportunities • Reduce Income Taxes, Estate Costs • Efficient Capital Provides Efficient Income • Provide Flexibility • Including for catastrophes • Provide A Creditor Proof Structure • Use Redundant Capital Effectively • Reposition Seasonal Cash Flow • Invest For Better Yield • Use Leverage Effectively • Borrow For The Peaks • Use Back To Back Loan Structure

9. What We Do • Clarify Objectives • Retirement Cash Flow • Security • Children Succeed • Equitable Estate • Organize Resources • Relate Your Situation to “THE SYSTEM” • Find Efficient Ways To Join Your Resources, The System And Your Objectives • Integrate Your Plan With Successors’ • Co-ordinate With Other Professionals • Communicate • Review & Follow-up

10. Some Planning Areas • Efficient and Safe Income • Minimize Capital Commitment To Get The Retirement Cash Flow Answer • Shed Catastrophic Risk • Use The Income Tax Act To Advantage • Good Money, Bad Money Issues • Compartmentalize Problems And Solutions When Possible

11. Some Obvious Plans • Use Efficient Ways To Get Spending Money & Make It Independent Of Business Success • IPP, RCA, RRSP, Holding Company • Minimize The Tax Drag • Corporation Pays First or Maybe No One Pays

12. Avoid Systemic Costs Where Possible • Example - Tax Clawbacks • For someone 65 or older, the government claws back various benefits and exemptions based on income. By $65,000 they have taken back 9. • The 10th Is The OAS Clawback • From income of $65,000 to about $110,000 you lose an extra 8.5% to the government. More like 13% of cash dividends but only to about $90,000

13. Notice That Income And Cash Flow Are Not The Same Thing. • You Spend Cash Not Income • Drawing Down A Shareholder Loan By $20,000 Per Year After 65 Gets The Same Answer As Taking $45,000 From An RRSP • Drawing Down An RRSP Before 65 Sometimes Is Better Than Leaving It

14. Know The RulesCPP Systemic Cost You Are 59 Now And Have Contributed At Maximum for 42 years. (More complex for females with children) • Paying $4,000 Each Year From Now To Age 65 Will Increase Your CPP Monthly Benefit At Retirement By: • Zero Dollars Per Month • If You Are 60 And retired 6 years ago you can have 70% of maximum now or about 87% at 65. • Give up $40,000 for an extra $1,900 a year later won’t breakeven in 20 years.

15. Some Planning Is Not Obvious • Secure Shareholder Loans & Pay Interest • Interest does not attract EHT • Protect Accumulated Values • Have Your Corporation Pay For Whatever It Can • Including Non-deductible Expenses • Have Many Wills • For Example: Ontario Business Shares, Ontario General Assets, Possibly Wills For Several Other Jurisdictions • Avoid Probate Costs • Leave Everything To Trusts Not To People • Use Current Income Taxes Payable To Provide Estate Liquidity And Late-life Emergency Capital • Uses Riskless Leverage To Reduce Cost • Some EI cost are unnecessary, some WSIB

16. Start Now • Get A Head Start • Some Things Take Time To Mature • Henry Ford Started Planning His Estate On His Death Bed. 90 Days Is Not Long Enough • But Be Flexible • Harold Ballard Started His Plan 20 Years Before His Death. Unpleasantly, The Plan Only Lasted 11 Years. The Tax Cost To Fix It Was More Than $15,000,000

17. Seek Help • Each Profession Has Something To Contribute. None Can Deliver It All. • Professional Objectivity Helps • Your Time Is Better Spent Otherwise • You Need A Guide/Motivator/Coordinator/Communicator • You Are Going To Do This Only Once So You Won’t Learn Much From Experience • If At First You Don’t Succeed • Don’t Build Your Own Succession Plan

18. Some Succession Plans Fail • They get to be like the City’s Official Plan • Meant to be filed not implemented • Biggest impediments to effective Implementation • People don’t know where to start • Might force discussion of unpleasant facts • It is not urgent

19. A Good Observation The Urgent Is Seldom ImportantAndThe Important is Seldom Urgent

20. Document and Communicate • Wills • Powers Of Attorney • Business Agreements • Estate Inventory • Succession Is Part Of AnEstate Plan • Family All Know The Plan AndEach Has A Part To Play

21. We Can Help • The Guide • Help Clarify Objectives • Help Organize Resources • Find Efficient Methods To Match Resources To Goals • The Motivator • Sales People Help People Make Decisions • Sales People Are Persistent • The Coordinator • Familiar With The Roles Of The Professionals Involved • Know Where The Overlaps And Conflicts Will Arise • The Communicator • Objective • Skilled At Reporting, Speaking, Presenting • Simple And Direct