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.

How does the death of a spouse impact your separation? What rights do the estate and the separated spouse have in Ontario?

man with lawyer illustrating separated but not divorced and spouse dies in ontario

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.

In a perfect world, life would happen at the pace we need it to, and the timing of big life events would be in a certain order.  Unfortunately, that is not always the case. 

In some rare instances, you may be separating from your spouse when they pass away. What happens in that instance? And how can you make sure your estate plan is ready for anything?

In this article, we will talk about what happens if your spouse dies while you are in the middle of a separation. We will answer these questions: 

  • What is property equalization in family law?
  • Can a surviving spouse make a claim against the estate for equalization? 
  • Can the estate make a claim against the surviving spouse for equalization? 

If you want to learn more about how separated spouses are treated under the Succession Law Reform Act, please note that there have been changes that came into effect January 1, 2022 that impact what you may inherit. For example, marriage no longer legally revokes a previous will. We have an article on the subject here.  

A note for common-law spouses: property equalization only applies to married spouses  

This article only applies to married spouses. The property equalization portions of The Family Law Act do not apply to common law spouses. 

What is property equalization during a divorce? 

Property equalization is a fundamental principle in family law that aims to ensure fairness in the division of marital assets between spouses. It is based on the idea that each spouse is entitled to a fair portion of the property and assets that were acquired during the marriage. 

How is property equalization calculated under Ontario’s family law? 

Calculating an equalization payment involves two main steps. First, each spouse determines their individual net family property (NFP). This means assessing the value of their assets minus any debts as of the separation date and subtracting the value of assets minus debts as of the marriage date. If any property is jointly owned, such as the family home, each spouse includes half of its value in their NFP calculation.

Let’s use Spouse A and Spouse B as examples. First, each spouse calculates their individual net family property.

Spouse ASpouse B
Assets minus debts at date of marriage$20,000Assets minus debts at date of marriage$25,000
Assets minus debts at date of separation$100,000Assets minus debts at date of separation$45,000
Individual net family property$80,000Individual net family property$20,000

Next, the spouse with the higher NFP compensates the spouse with the lower NFP with half the difference. This is the equalization payment. 

In our example, the difference is $60,000. So Spouse A would pay Spouse B half of the difference (or $30,000). The courts may order an amount different from this calculation in certain circumstances, but this is the general principle. 

Now, imagine one of the spouses dies before this process begins. If you are the surviving spouse, what rights do you have to a share of your spouse’s property? 

Can claims be made against estates to protect the property rights of separated spouses?  

Short answer: yes.

Let’s consider our example above. Say Spouse A passed away before Spouse B filed a claim for their equalization payment. Spouse B can still file a claim, even though their former spouse has passed away. 

Even if the equalization process had not begun before the spouse’s passing, the surviving spouse retains the right to claim against the estate for their fair share of marital assets.

Can the estate make a claim against the surviving spouse for equalization?

Short answer: no.

In our example above, let’s say that Spouse B passed away. Can that spouse’s estate file a claim for equalization? It cannot. 

The estate cannot make a claim for equalization against the surviving spouse. It can continue an application that has already been filed, but it cannot bring a new application. The estate is at a disadvantage if an application for equalization has not begun. 

How does this impact Ontario families? 

If you are separating and in poor health, you should commence a court action to have your property divided sooner rather than later. That way, your estate can continue the action, and you can protect your property rights for your children or other beneficiaries. 

Comprehensive Legal Advice with Beeksma Law: Contact us today!

Navigating the intersection of family law and estate law requires expertise and insight into the nuances of Ontario’s legal framework.

At Beeksma Law, we understand the complexities and sensitivities involved in matters of separation, divorce, and estate planning. We understand how The Succession Law Reform Act affects other areas of law. Our experienced team is dedicated to providing comprehensive legal guidance tailored to your unique circumstances.

Whatever your situation, having a strategic advocate in your corner to create a strong estate plan can make a world of difference. Our compassionate and thoughtful approach ensures that your interests are safeguarded every step of the way.

Reach out to our team today for assistance with all things estate law. This includes succession law, intestacy (or if you spouse dies without a will), property outside Canada, and more! 

What to know before you buy a book of business from a financial advisor

financial advisor buying a book of business

Disclaimer: This article discusses purchasing 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.

If you’re a newer financial advisor, you might consider purchasing a retiring advisor’s business. This can be a strategic way to grow your business, but before you buy a financial advisor book of business, there are some factors to consider. 

For example, you want to ensure that you can handle new clients without sacrificing your current client base. You’ll also want to ensure that it’s the right fit for you and that you have the cash flow to afford the purchase price. 

Most importantly, you’ll want to make sure that the transaction is set up properly and that you do your due diligence first. In this article, we will discuss what factors you need to consider. However, each transaction is unique, which is why you’ll want to contact our team and discuss the details specific to your purchase. 

Why a book of business acquisition is unique

If you’re a financial advisor and find a book of business for sale, you should know that it is significantly different than other business purchases. For example, let’s say you were buying a cafe. That business has tangible assets, such as equipment and merchandise, which can be easily valued and assessed. 

Buying another advisor’s financial practice does not have that. It is primarily composed of intangible assets, such as client relationships and revenue streams.

This raises many questions, including:

  • How do you assign value to intangible assets like client relationships and revenue streams?
  • How will you transition into this business? Will there be a succession plan?
  • What will the role of the selling advisor be after the transaction? 

Many transactions we see lack the legal structure that should be in place. These deals are too large and worth too much to your future to leave to chance. Understanding these differences is crucial not only to acquiring the business but also to successfully integrating it into your current practice.

Is it a share purchase or an asset purchase (or both)? 

This is one of the most important questions you’ll need to answer, and you’ll want to make sure that what you purchase matches what you expect to get. 

First, what’s the difference? Share purchases involve acquiring ownership of the seller’s company, including all assets and liabilities. On the other hand, asset purchases entail acquiring specific business assets, such as client lists and contracts, while leaving liabilities behind. 

Many believe that a corporation owns a book of business and that a share purchase will entitle them to it. In many cases, this is not true, at least not without careful planning. 

CIRO (the Canadian Investment Regulatory Organization) does not currently allow corporations to receive the income stream generated by investment portfolios. It must be paid to a person, the licensee, who owns those revenue rights. Therefore, a purchase of the shares of a corporation would not entitle the buyer to receive that income stream. 

There are some strategies that can be implemented, but the vast majority of sellers have not done the years of foundational work and planning needed to make them possible. 

Should you require a valuation on the book of business? 

Short answer: yes. Let’s explain why. 

A comprehensive valuation provides insights into what you’re purchasing. These transactions involve a lot of money – you are buying a business! – and you want to make sure that the book is worth it. 

This can also impact your tax bill at the end of the year. Your taxes will be based on the value of the transaction. If you have overpaid for another financial advisor’s book of business, you are still on the hook for that tax bill. 

At Beeksma Law, we are connected with experienced business valuation professionals who can help you determine what this business is worth. 

Is there a transition plan after you buy a book of business?

The deal is not over once the transaction closes. 

You must consider a transition plan to integrate new clients into your existing business seamlessly. A well-thought-out plan will outline the steps and timelines for integrating the acquired business. It will also lay out client communications, integrating staff and technology and how the seller will support the buyer during the handover period. 

Communication is crucial; spelling out these plans within your agreement will prevent many headaches. 

Beeksma Law: Specialized legal advice for financial advisors 

Many clients I speak to about this type of transaction are unaware of the legal complexities involved in purchasing a book of business. However, at Beeksma Law, we have handled these transactions for many professionals in the financial services industry. We are happy to offer comprehensive legal services tailored to your unique needs. 

From structuring the transaction, negotiating and drafting the agreements and navigating regulatory requirements, we can help you start the next chapter of your business on the right foot. 

Reach out to our team today to learn more.