Strategic Tax, Insurance, & Estate Planning in Action
Solving a $5.3M Estate Tax Challenge with Liquidity—and Logic
Client Background
An affluent couple faced an uncomfortable contradiction: an $18 million estate, yet limited liquidity to handle a looming $5.3 million tax bill. Their wealth was real, but not readily available. With most of their capital tied up in frozen preferred shares, traditional insurance solutions felt out of reach, and the threat of a forced real estate sale loomed in the background.
That’s when our team stepped in. By blending intelligent insurance design with careful estate planning, we helped turn a potential liability into a long-term advantage—protecting income, preserving legacy assets, and avoiding unnecessary financial strain.
The Situation: Locked-In Value, Looming Tax
Despite having a high-net-worth balance sheet, the couple faced limited flexibility. An estate freeze had concentrated $13 million in preferred shares, and their accountant identified a $5.3 million tax liability that would arise upon the second death. Liquidity was tight, and ensuring income protection for the surviving spouse was a clear priority.
The initial insurance proposal—a $125,000-per-year joint last-to-die policy—felt more like a burden than a solution. We saw a different path.
The Strategy: Timing, Structure, and Simplicity
We replaced the costly, back-loaded approach with a structure that delivered liquidity when it mattered most.
We began with a joint first-to-die corporate-owned policy. With premiums of $80,000 per year, fully funded by the corporation, the couple preserved their personal cash flow. More importantly, the $3 million in tax-free proceeds flowed into the company at the first death, not the second. That payout triggered a Capital Dividend Account credit, unlocking tax-free distributions.
Next came the spousal roll-and-redeem plan. By rolling assets to the surviving spouse, we deferred the tax bill. Then, using the CDA credit, the corporation redeemed $3 million in preferred shares without triggering taxable dividends. Those funds were reinvested, generating retirement income and preserving asset growth.
Finally, we mapped a long-term wind-down of the remaining $10 million in preferred shares. Spreading the redemptions avoided tax spikes and offered flexibility, giving the family control over timing, income, and outcomes.
The Result: Liquidity Without Sacrifice
This strategy didn’t just reduce the estate tax burden. It protected lifestyle, preserved real estate holdings for the next generation, and avoided financial disruption.
What This Teaches Us
Smart planning isn’t about one product. It’s about alignment.
Timing matters. Liquidity at the right moment opens doors.
Structure matters. Insurance is most powerful when it’s part of a broader strategy.
Partnerships matter. Collaborating with accountants and tax advisors unlocks better outcomes.
Could This Work for Your Clients?
If you’re working with families navigating an estate freeze, concerned about future tax exposure, or balancing legacy goals with income needs, this integrated approach could be the difference between tension and clarity.
Let’s talk about what clarity could look like for your clients.
This information has been prepared by Mehul Gandhi, CFP®️, CLU®️, TEP who is an Estate Planning Specialist and Senior Insurance Advisor for Westmount Wealth Planning Inc. Westmount Wealth Planning Inc. is a subsidiary of Westmount Wealth Management Inc. Westmount Wealth Management Inc. is registered as a Portfolio Manager in British Columbia, Alberta, and Ontario.
This material is distributed for informational purposes only and is not intended to provide personalized legal, accounting, tax, or specific investment advice. Please speak to a Westmount Wealth Advisor regarding your unique situation.
