Estate Planning Strategies for Business Owners: The Role of Graduated Rate Estates (GREs)

When you’ve spent years building a successful business, the last thing you want is to see your hard work eroded by taxes or poor planning when you’re no longer here. Many business owners wonder how their company and family wealth will be handled in the future. One important tool to understand in this process is the Graduated Rate Estate (GRE).

A GRE is a special type of trust that can make a real difference in estate planning. For business owners, it offers opportunities to reduce taxes and provide for family members in a smoother, more flexible way. By understanding how GREs work, how to set one up, and how they can be used effectively, you can leave a stronger legacy for both your family and your business.

What is a Graduated Rate Estate?

When someone passes away, their estate is treated as a trust for tax purposes. Normally, trusts are taxed at the highest personal income tax rate. A GRE, however, is different. It allows the estate to be taxed at the same graduated rates that apply to individuals — but only for a limited time.

The GRE period lasts for 36 months after death. During this time, the estate can take advantage of lower tax brackets, which can reduce the tax burden on income earned by the estate. This gives executors and families time to manage assets, settle debts, and make thoughtful decisions.

For business owners, this period can be especially valuable. Business shares, dividends, and other income can flow through the GRE and benefit from graduated tax rates, instead of being taxed at the top rate right away.

Why GREs Matter for Business Owners

Business ownership adds complexity to estate planning. Without preparation, your estate could face a large tax bill when shares are deemed sold at death.

The GRE helps by:

• Reducing immediate tax pressure through graduated rates.

• Allowing time for decisions about whether to sell, restructure, or transfer the business.

• Providing flexibility to allocate income among beneficiaries more efficiently.

Simply put, the GRE gives your family more options and less stress during a time of transition.

How to Set Up a Graduated Rate Estate

A GRE only takes effect after death, but it needs to be set up properly in advance. Here are the key steps:

• Have a valid will. This creates your estate and names an executor. Without one, GRE status is much harder to secure.

• Appoint only one executor. For the estate to qualify as a GRE, it must be tied to a single executor named in your will.

• Executor files the GRE designation. This happens with the first estate tax return (T3), and includes providing your SIN and a copy of the will.

• Stay within the 36-month period. GRE status only lasts three years, after which estate income is taxed at the top rate.

This is where your financial advisor plays a key role. We help align your will, executor choice, and tax planning with your business and family goals. Working alongside your lawyer and accountant, we make sure everything fits together.

Practical Strategies Using GREs

Once a GRE is in place, business owners can use it to their advantage. Here are a few strategies we often discuss with clients:

• Timing business income – Deciding how and when to report business income within the GRE.

• Coordinating with trusts – Using the GRE before moving assets into another trust to help reduce taxes.

• Planning share redemptions – Redeeming or selling private company shares in stages, rather than all at once.

• Supporting succession plans – Giving family or successors time to decide the future of the business without unnecessary tax pressure.

Steps Business Owners Can Take Now

Even though the GRE takes effect after death, there are things you can do today to make sure it’s available and effective:

• Choose an executor carefully. This person will be responsible for filing and managing the GRE.

• Document your wishes. A clear will makes sure your business is handled the way you intend.

• Work closely with your financial advisor. We act as the coordinator between your lawyer and accountant, helping ensure your GRE is set up properly and fits your bigger picture.

• Review regularly. As tax rules, your business, or your family situation changes, we’ll help you keep everything up to date.

By putting the right pieces in place, you can give your family more time, more flexibility, and less financial stress when they need it most.

Talk to us

Graduated Rate Estates may sound technical, but they can make a meaningful difference for business owners. They provide a unique 36-month window where taxes are reduced and choices can be made more thoughtfully, helping protect the business legacy you’ve built.

If you’d like to explore how a GRE could fit into your estate planning, talk to us. Together, we can make sure your plan is structured to support your family, manage taxes wisely, and keep your business future secure.

This is for informational purposes only and does not constitute financial, legal, or tax advice. Always consult a qualified professional regarding your specific situation. We are not responsible for any actions taken based on this content.