Your Professional Practice Lifecycle - Wealth Accumulation and Achieving Your Financial Objectives

Fourth in a five-part series on what you need to know at various stages of your professional practice.

Further to our series related to the evolution of your practice, this article focuses on your financial success as it relates to your ability to accumulate corporate wealth from your medical practice’s income / savings.

Corporate wealth is the term we will use to describe the practice income you have earned within a corporation. This is income that you have paid the applicable corporate rate of income tax on but have not yet withdrawn from the corporation. If at any point, you decide to withdraw these funds for personal use, you may also have to pay additional income tax, so it’s important to consider the tax implications and integrate strategies to minimize the impacts.

Whether your accumulation is based upon a couple of years of making more money from your practice than you need to withdraw personally and your corporate wealth has just reached $100,000 or more, or you have been doing this for 10 years plus and your corporate wealth is now $1,000,000 or more, at some point you realize you are able to achieve most of the financial goals you have set.

So, the key questions for you now are: How have your financial objectives changed? How can these changes be implemented?

1. You might want to provide support to your children with their post-secondary education needs. There are strategies to provide funding to your children (age 18 or older) from your corporation. The combined advantage of your child’s low personal marginal tax rate and the post-secondary education tax credits for tuition usually result in very tax efficient funding compared to Mom and Dad paying the University costs. Be careful though, knowledgeable planning assistance is needed.
2. You might want to be able to provide “cost-of-care” assistance to your elderly parents. There are strategies to provide such support to your parents at their personal marginal tax rate. Planning for this requires consideration of available subsidies for MSP premium assistance, Old Age Security Guaranteed Income Supplement payments, GST credits, and how your parents will hold their interest in your corporation. Again, planning expertise is important to get this right.
3. You might decide to donate some of your wealth. It is wonderful when the value of your “generosity” objectives can be enhanced. As discussed above, the wealth within your medical corporation may consist of publicly traded stock positions that have unrealized gains in value from your original purchase(s). Did you know that your corporation can donate these to a registered charity and receive a donation tax credit for the fair market value of the stock? And, if you do this properly, you do not have to report the capital gain on the stock in doing so. Yes, again, expert planning assistance is recommended.

With more than more 12,000 Professional Services clients, MNP has developed a diverse suite of services designed to provide a collaborative, cost-effective approach to doing business and personalized strategies to help professionals succeed at every stage of their practice.

Contact Don Murdoch, B.C. Leader, Professional Services at 1.877.766.9735 or [email protected]