Mike: Hi I’m Mike Gassewitz head of Member Solutions here at MD. Joining me today is Lowell Thiessen, one of our experts focused on medical practice incorporation. Lowell, I know that when a physician is considering incorporating there is a lot of items to take into account, a lot of issues to consider. Maybe you can talk about, first of all, some of the advantages of incorporating and then also the MD approach.
Lowell Thiessen, Wealth Planning Support Lead, MD Management Limited
Lowell: Sure. So primary advantage or the reason to consider incorporation for physicians is it’s a wealth enhancement strategy. In terms of the MD approach in that regard we’re there with information, advice and solutions every step of the way. My involvement has been twenty years with a team of dedicated experts that is so good that we’ve written the book on incorporation so to speak, both figuratively and literally.
Mike: So what aspects of incorporation does that cover?
Lowell: So the guide’s context is it’s intentionally not an encyclopedia or an app, it’s a reference tool that’s there 24/7 as one of a series of tools that the advisors can draw in. For what’s in the book on the incorporation decision, it’s about enhancing savings and income splitting. For the practicing physician it includes investment management tips as well as compensation decision factors. For life after medicine, it has the range of the gamut from retirement considerations to effective intergenerational wealth transfer solutions.
Mike: Sounds very comprehensive, maybe you can talk to some of the other questions you get on incorporation from some of our clients.
Lowell: Sure! So, popular question: should I incorporate? And it is a question - the situations where it makes the most sense are where it can enhance your savings or help through income splitting. Second question that I bump into regularly is: what should my compensation be, should it be salary or dividends? That’s rarely a one variable issue and it’s rarely that one of those is the sole solution, in fact, it often evolves over time. And the third question: should I save in my RSP, or my corporation of my TFSA? And like the previous one that’s something that often evolves, RSPs commonly are a good starting point, corporation once cash flow frees up and TFSA is particularly once legacy issues build. But as in the case with all guidelines, it’s a guideline, not a rule. See your advisor for a tailored recommendation.
Mike: And I can see with all the variables, issues at play, and you must deal with a lot of different situations. Are there a few anecdotes that stand out for you?
Lowell: Some stories from the field! We get brought in on, or I get brought in on some complex cases, and they’re never dull. The first one that comes to mind, we’ll start on the young end of the scale was a resident looking to start her practice in three different provinces. And dealing with all of the just getting started issues she had added to that, I’ve got to figure out the best corporate scenario and where was the best place to incorporate.
There’s another where it was a U.S. citizen, so brought in U.S. person issues. So the million dollars they had in investments included a corporation account and they needed help sorting out the ramifications of US rules, and we can’t change those, but we can help. That said U.S. person rules are such that incorporation benefits may be materially impaired and incorporation may not be relevant.
Last but not least, a happy story where, just ran numbers in a retirement case for a physician that had built their wealth to twenty million dollars in their corporation. Children, grandchildren, competing, time horizons and different purposes and for them, it was the reality that multiple corporations became appropriate. We ranged the gamut’s, corporation might not be appropriate to multiple corporations and strategies related to it are relevant and necessary and MD advisors are there to help.
Mike: I think that’s a great way to end. It can be advantageous and corporation can be advantageous but it’s also complex and it’s great to see that we’ve got some good expertise to help physicians through this. Thanks again Lowell.
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