Estate planning: How tax on split income can affect your strategy
Estate planningHow TOSI rules affect Canadian estate planning, income splitting, and intergenerational wealth transfers—and what to consider when structuring your strategy.
Many family business owners believe that passing a company down to the next generation is as straightforward as passing a torch. However, with evolving tax policy, shifting economic conditions, and rising valuations, business transitions have become more complex than ever before. Changing generational attitudes are also challenging traditional succession models focused on passing down operational control. While succession planning has always involved a multifaceted audit of emotional readiness, evolving expectations, and strategic governance, overcoming the challenge of bridging generational gaps is emerging as a defining factor for long-term success and continuity of family businesses.
Families need to consider how family and ownership dynamics shape the business and the transition, and how detailed planning can help minimize complexities and prevent costly mistakes. In this article, some of our experienced tax and family enterprise advisors (FEAs) discuss how the family business landscape is changing and how their roles as advisors are evolving along with it. We examine the external factors, like the economy, trends in business valuations, and advancements in technology, alongside the emotional side of family business to break down how succession is changing—and how our planning strategies must follow suit.
Setting the stage
I’m seeing far fewer intergenerational business transitions today than I did 10 years ago. Several factors are driving this shift—rising business valuations, evolving generational values, and a growing desire among founders to access liquidity and diversify their assets. It’s also just harder to run a business in today’s environment.
Michael Stubbing
Managing Partner - Vancouver Island
Economic impact on family business
Over the past decade, Canadian family businesses navigated a period of significant economic disruption and recovery. Due to global economic volatility caused by the pandemic, family businesses—especially those in industries like hospitality, retail, and manufacturing—faced supply chain challenges, labour shortages, and shifting consumer behaviour. Then, as the economy recovered, tax policy evolved, and interest rates rose, family businesses started getting creative. They began to adapt to new conditions and test new business models to meet the needs of their customers. Businesses that adapted their strategies, adopted technologies, and demonstrated operational resilience rebounded—and their business valuations continued to grow, exceeding pre-pandemic highs.
Higher valuations raise the stakes
The increased valuation of these businesses—driven by globalization, digital transformation, private equity interest, and strong market performance—has significantly reshaped the dynamics of succession planning. In previous generations, family businesses were often valued modestly, with transitions occurring informally or within tight-knit family circles. Today, many family-owned enterprises range from smaller home businesses or “mom and pop shops” to much larger organizations worth tens or even hundreds of millions of dollars. With increased valuations, generational buyouts have become major financial transactions, rather than just symbolic handovers. This shift has made succession planning a high-stakes endeavor, with increased wealth, tax liabilities, and more complex structures. In addition, with climbing business values, deciding whether to sell or tackle the challenges of passing it down carries a lot more weight. It ends up being more than just a financial choice—and a much bigger decision than it used to be.
It creates a paradox: you have something of real value, but putting a price on it forces you to weigh that against what future generations might lose. For the current leader, it becomes a deeply personal dilemma—Am I making the smart move for my family by cashing out at the right time, or am I letting go of something that could turn into even more down the line?
Lou Celli
Partner
Advancements in technology
Converging technologies are also reshaping the business landscape, as AI and automation disrupt entire industries. For example: in healthcare, AI-driven systems are outperforming humans, farmers are leveraging AI to optimize crop yields, and manufacturers are using intelligent systems to improve supply chain efficiency. Family businesses that aren’t adapting to change could fall behind competing businesses, cause tension between incoming owners, and make business transitions more complicated.
The generational divide
With a record amount of wealth transitioning from one generation to the next, bridging the expectations, work ethic, and priorities between them is becoming a noticeable challenge. Generation X business owners are characterized by a work-centric lifestyle. They pride themselves on the “blood, sweat, and tears” it took to build the business. Their identity is deeply intertwined with the business, which can lead to resistance when successors propose change. While Millennial successors—often armed with diverse external experiences and different challenges—may not feel as deeply and emotionally connected to their family’s business. They’ve witnessed the grit, sacrifice, and long hours the previous generation prided themselves on and many are choosing to distance themselves from that lifestyle. Instead, they are highly progressive, value flexibility and work-life balance, and generally strive to work in environments that align with their values. And Gen Z successors, which will make up around 30% of the workforce population in the coming years, are the first generation that has grown up with digital technology, giving them unique access to information, different perspectives, and community.
Given these generational differences, the traditional models of succession planning are evolving. As such, our guidance is evolving. Our advisors are noticing that some incoming leaders are not falling into their parents’ plans, as expected, which can often come as a shock and cause conflict among family members. In many cases, the next generation is seeking ownership without operational responsibility or showing interest in completely different paths, signaling a need for more inclusive planning and clearer communication. Families are having to consider planning beyond business succession to include wealth succession, prompting a broader approach to transition planning.
In addition, succession continues to be deeply emotional. Maintaining family harmony remains a top priority. When working with family, there’s more at stake than just wealth. If tension exists between retiring and incoming owners, fear of losing relationships with their children and grandchildren can cloud judgement and delay critical decisions.
We can talk about wealth and business strategy, but at the end of the day, it’s the family relationships that matter most. Parents often worry that succession conversations could affect their relationship with their children—and, by extension, their grandchildren. Creating the right environment for open, respectful dialogue can help families navigate these transitions with less conflict and more clarity.
Krista Han
Managing Partner - New Brunswick
Strategic planning for seamless leadership and wealth transitions
As family businesses become more complex and more valuable, planning should be at the forefront, as they outgrow informal governance structures. Our advisors can help understand your family dynamics, ownership structure, and business objectives to introduce more formal governance for growing family businesses. Formal governance structures help families separate personal dynamics from business decisions. It also helps to provide objectivity and continuity, especially when leadership transitions aren’t fully baked.
Bridging generational gaps is about understanding each other’s perspectives and aligning on a joint vision. By acknowledging the external factors and emotional dynamics, our advisors can work with families in business to embrace governance and foster strong ownership and/or leadership transitions. Together, we can turn succession from a point of tension into a moment of transformation, so we go beyond preserving legacy to also help promote longevity.
To connect with us on estate planning and to receive new content in this series, please fill out the form below.
Related insights
|
8 min read
|
14 Apr 2026
Prepare the next generation for wealth
Succession planningWhether you sell or pass down your family business, preparing the next generation should be a key part of your succession and financial planning.
A powerful strategy for your family and business
Estate planningEstate planning helps to ensure your wishes are known, preserve your wealth, and give loved ones peace of mind. From tax planning to asset protection, start now