May, 2024

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Financial Advisors: What you need to know before selling a book of business 

financial advisor selling book of business

Disclaimer: This article discusses selling a book of business.  It is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

Are you a seasoned financial advisor looking to retire and transition your practice? Have you thought about selling your book of business to a newer advisor looking to expand strategically?

This is an exciting time in your career. You put in a lot of work to build your business, and how satisfying to find the right advisor looking to buy your business and carry on your legacy of excellence. 

While this can offer a significant opportunity and help advisors on both sides, it’s essential to approach the process with caution and carefully evaluate various factors before moving forward. 

In this blog post, we’ll delve into what you need to know about listing your financial advisor practice for sale and provide valuable insights to help you make informed decisions.

Understanding the Unique Nature of Book of Business Acquisitions

Unlike a transaction to buy a business like a café or a store, your book of business entails dealing with predominantly intangible assets such as client relationships and revenue streams. This presents a unique set of challenges, including how to assign value to these intangible assets and plan for a smooth transition post-acquisition.

The Buyer’s Due Diligence When They Find a Book of Business for Sale  

When we assist buyers who want to buy a book of business, we outline the due diligence that we recommend, listing the items below and many others. 

The buyer will consider how bringing on the new business will impact their financial advisory practice. 

The buyer must first consider if they can handle the influx of new business without neglecting their existing client base. They’ll also consider whether they have the financial resources and cash flow to afford the purchase price and sustain the business post-acquisition. 

Expect a valuation as part of the selling process.

A savvy potential buyer will want to have a professional valuation of the sale to make sure that the value of your book of business is clear. 

Start building your plans now if you’re looking to sell a financial advisor book of business 

The foundational work that you need to do before selling your business should begin years before you actually find someone to buy your financial advisory practice. 

For example, it’s a common misconception that ownership of a book of business automatically transfers with a share purchase of a corporation. However, this assumption often overlooks important regulatory considerations.

The Canadian Investment Regulatory Organization (CIRO) prohibits corporations from receiving income generated by investment portfolios. Instead, this income must be allocated to the individual licensee who holds the revenue rights. Consequently, selling the shares of a corporation does not necessarily entitle the buyer to your income stream without careful planning.

While certain strategies can be employed to address this issue, it’s noteworthy that many sellers have not undertaken the necessary groundwork and planning to make them feasible. If you are thinking about a succession plan, or selling your financial practice, reach out to us today!

Putting a transition plan in place 

The journey doesn’t end once the deal is sealed. For someone who buys a financial advisor’s book of business, a well-thought-out transition plan is crucial for integrating the acquired business seamlessly into your existing practice. This includes client communication strategies, staff integration plans, and seller support during the handover period. Clear communication and meticulous planning are key to a successful transition.

You have been committed to your clients for many years – how are you going to ensure they are in good hands and can start building a new relationship with the financial advisor that will now be handling their affairs?

Whether you want to sell or buy a book of business: Beeksma Law provides specialized legal advice for financial advisors 

Buying and selling a financial advisor’s book of business is no small transaction. For the buyer, it represents the path that their business will take for years to come. For the selling advisor, it is the culmination of a career’s worth of effort. 

It’s too important to leave to chance. Instead, you need focused expertise. At Beeksma Law, we have experience in providing comprehensive legal services tailored to the unique needs of financial advisors. From helping you prepare before selling the book of business to preparing the purchase agreement and more, our team is dedicated to helping you embark on the next chapter of your business journey with confidence. Reach out today!

Estate Law & Litigation: What happens to a lawsuit if the plaintiff or another party dies? 

what happens to lawsuit if plaintiff dies before settling

Disclaimer: This article discusses Estate Law.  It is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

Civil litigation on its own can be complex. What happens if a party passes away while the litigation is ongoing?

This creates a whole host of issues to consider. In this article, we’ll talk about the estate trustee’s next steps. However, each situation is unique, and it is always wise to talk to an estate attorney about your pending lawsuit. 

What happens in a civil lawsuit if the defendant dies?

In Ontario, if a party involved in legal proceedings passes away, those proceedings related to the deceased’s interests or liabilities in the lawsuit are promptly halted, known as a “stay.” This means that the court will not permit the action to proceed unless specific conditions are met. Rule 11 of the Rules of Civil Procedure outlines the procedure for parties to resume the action following the death of a party. 

What happens when a plaintiff dies? 

This can happen fairly often in a personal injury lawsuit, as it can take years to settle or go to trial. The same rules would apply as noted above. 

However, in some instances, a claim may not continue after the plaintiff’s death. For example, Ontario courts have barred an estate from continuing a Charter claim that the deceased had commenced against the federal Attorney General. 

Who can obtain an order for continuance?

According to Rule 11.02 of the Rules, if a person’s interests or responsibilities in a case transfer while the case is ongoing, anyone interested can ask the court to continue the case by filing the appropriate documents.

However, although the rule mentions “any interested person,” court decisions suggest it’s usually the executor of the deceased’s estate who must do this for a deceased plaintiff. This makes sense because whatever the deceased’s role was in the lawsuit becomes part of their estate.

What if someone dies without a will? The courts may be cautious about giving someone authority over litigation without the proper estate administration in place (such as a court appointment for an estate trustee). 

What if the estate has not obtained an order for continuance?

Suppose a plaintiff has passed away and his or her estate has not obtained an order for continuance.

If the estate does not obtain an order for continuance, defendants have two options:

Option A: Defendants can take the initiative to obtain the order themselves under Rule 11.02(1). This involves naming the trustee in substitution for the deceased litigant. 

Option B: Defendants could alternatively move under Rule 11.03. This rule allows for a motion to dismiss the action for delay if no order to continue is obtained within a reasonable time after the transfer or transmission of the plaintiff’s interest.

To make a motion under Rule 11.03 (Option B above), you must prove that the delay was unreasonable. 

Ontario courts consider various factors in determining reasonableness, but there are no specific guidelines on the length of delay. Factors that the courts would consider include the time required to obtain a certificate of appointment for the estate trustee, especially in cases of intestacy, and any legitimate reasons for the delay.

In many cases, it may be preferable for the defendant to simply obtain the order for continuance for themselves. 

Beeksma Law: Your partners for comprehensive estate advice 

Navigating estate law and litigation demands a nuanced understanding of legal procedures and implications, especially in cases involving the death of a party. At Beeksma Law, we recognize the complexities inherent in these matters and are committed to providing comprehensive estate advice and representation.

Whether you’re facing challenges related to the death of a party in ongoing litigation or seeking proactive legal guidance for estate planning, our experienced team is here to support you every step of the way. Trust Beeksma Law to be your partners in safeguarding your interests and securing your legacy.

Inheriting real estate in Canada: Do capital gains tax changes apply when you inherit property? 

Photo of a home representing if capital gains tax inherited property

Disclaimer: This article discusses estate planning.  It is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

When it comes to estate planning, there are many decisions to make. 

What are the proposed capital gains tax changes?

One of the federal government’s changes relates to real estate. The proposed change applies to individuals and would raise the inclusion rate to 67% on capital gains above $250,000. 

What does that mean? 

The first $250,000 in capital gains would be taxed at 50% of the asset’s gain. For every dollar above $250,000, you would pay tax on 2/3 of the assets gain. 

Let’s use an example. Suppose you buy an investment property for $350,000.  Years later, you would like to sell it for $700,000. That leaves a profit of $350,000. 

Under the current regulations, the entire $350,000 is taxed at 50%, resulting in a $175,000 capital gain. 

However, under the proposed change, the first $250,000 would be taxed at 50%, while the remaining $100,000 would be taxed at the increased rate of 67%.

What does that mean if you inherit property?

It depends on whether the property was the deceased’s primary residence or not. 

If it was their primary home, then the estate does not pay capital gains tax when the property transfers. If it was a secondary residence, say a cottage, then it would be subject to capital gains tax when it transfers to the beneficiary. However, the estate would be responsible for paying that tax.

Either way, there are tax consequences when you, as the beneficiary, sell the property. It is likely subject to capital gains tax at that point.

What happens if the property value has increased in value? 

When an inherited property appreciates in value, the calculation of taxable capital gains hinges on the property’s fair market value at the time of inheritance. Put simply, the beneficiary becomes liable for capital gains tax on the difference between this fair market value and the property’s original purchase price.

For instance, let’s say Greg inherited his parents’ primary residence, which was valued at $600,000 at the time of their passing. However, his parents initially purchased the property for $150,000. Now let’s say that Greg decides to sell the home at a sale price of $700,000. 

Does Greg pay capital gains tax on the difference between what his parents paid for the home? Or does he pay based on the increase in value from when he inherited it? 

It would be the latter. Greg would be subject to capital gains tax on the $100,000 increase in value since he inherited the property.  

Is it time to look at your estate plan? Talk to Beeksma Law today!

Given the proposed changes to capital gains tax and their potential impact on property inheritance, now may be an opportune time to review and reassess your estate plan.

Consulting with tax experts and legal professionals can help you understand how these changes may affect your assets and develop strategies to minimize tax liabilities for your beneficiaries. Whether it’s updating beneficiary designations or exploring estate planning options, taking proactive steps can help ensure your assets are managed effectively. 

At Beeksma Law, we primarily practice estate law and are strategic advocates when it comes to protecting your legacy. Our team is dedicated to helping clients navigate complex legal matters related to estate planning, probate, and asset protection. With our expertise and personalized approach, we can assist you in creating a comprehensive estate plan that aligns with your goals and minimizes tax implications.

As trusted advisors in estate law, we understand the importance of proactive planning and attention to detail. With Beeksma Law by your side, you can have peace of mind knowing that your estate is in capable hands. Don’t wait until it’s too late – schedule a consultation with our team today to discuss your estate planning needs and start protecting your legacy for the future.