Estate Planning for Business Owners & Individual Pension Plans

 Individual Pension Plans


A few weeks ago I had an interesting lunch with Scott Plaskett, CFP of IRONSHIELD Financial Planning.  We were talking about some of the different kinds of estate planning work that we do for our respective clients – I draft wills and powers of attorney, establish trusts and offer advice on corporate divestment, and Scott works on the financial side of things.  During the conversation, Scott brought up something that I wasn’t familiar with – the Individual Pension Plan.


Scott explained that IPPs, introduced by legislation in 1991, worked similar to RRSPs in that they allowed for tax deferred accumulation of income, for the purpose of retirement planning; however, they differ in that they are characterized by greater flexibility and higher contribution limits than RRSPs.  IPPs must be tied to a sponsoring corporation, so they are a perfect fit for small business owners and professionals who work through personal corporations. 


I immediately thought of several of my clients who fit these criteria; business owners between the ages of 40 and 71 who typically max out their RRSP contributions.  IPPs offer considerably more than just tax deferral though.  When we sat down and looked at some of the case studies that his firm had worked on, the results were impressive:

  • Savings of thousands of dollars per year versus RRSPs
  • Tax deductibility of management fees
  • Generous past service buy-in allowances
  • Complete flexibility in contribution amounts
  • Tax preferred transferability of unused pension on death


The last item is of particular interest to small business owners who are interested in adding value to the corporate assets that they leave behind to loved ones.  Although my typical estate planning practice includes significant consideration for the succession planning of the corporation, in the past, the bulk of pension contributions were lost.  That doesn’t have to be the case anymore.


Clearly this is not your parents’ pension plan.  It’s a highly customizable financial vehicle that offers excellent savings for the right candidate.  Despite the fairly complicated process involved in setting the plan up, Scott will provide us with an illustration that will offer hard numbers  to reveal whether the plan is going to save the client money. 


I know that this is another great option that I’ll be keeping in mind when I do estate planning work for my business clients and something I’ll be recommending to a few of you in particular.  If you have any questions about your business and personal estate plan, contact me.  If IPPs fit into that plan, Scott Plaskett would be happy to assist in adding that part to the overall package.


Now my obligatory disclaimer – Scott Plaskett and Ironshield Financial Planning are not related to Andriessen & Associates in any way and the comments above are not meant to endorse any particular product or service.  That said, if you think that the product or service may be right for you, I encourage you to seek out the professional of your choosing to get more information.


Scott R. Young