Travelers Canada Sold: Investment & Tax Planning Guide

Question: How is my Travelers Canada business sale taxed in Canada?

Answer: Taxation depends on deal structure. Share sales may qualify for the Lifetime Capital Gains Exemption (LCGE) of $1,016,836 (2026) on qualified small business corporation shares—potentially making $1M+ tax-free. Asset sales are taxed differently: each asset class (goodwill, equipment, inventory) has specific treatment. Only 50% of capital gains are included in income, taxed at your marginal rate. For a $3.3B transaction, the choice between share and asset sale can mean $200,000+ in tax differences.

Question: Do I qualify for the Lifetime Capital Gains Exemption on my Travelers Canada shares?

Answer: LCGE eligibility requires your shares to be "qualified small business corporation" (QSBC) shares. Tests include: (1) Canadian-controlled private corporation at sale; (2) 90%+ of assets used in active business in Canada at sale; (3) 50%+ active business asset test met for 24 months pre-sale; (4) You (or related person) held shares since issuance. Professional verification is essential—errors result in six-figure tax bills.

Question: How should I invest my $3.3B business sale proceeds?

Answer: Large liquidity events require sophisticated planning. Immediate priorities: (1) Park proceeds in high-interest savings while planning—don't rush; (2) Assemble your team: tax accountant experienced with business sales, estate lawyer, wealth manager with experience in significant portfolios; (3) Structure decisions first: holding company vs. personal, RRSP contribution room, tax installment requirements. Investment deployment should be gradual—consider 12-24 months for full equity allocation. Diversification across asset classes, geographies, and managers reduces concentration risk. For proceeds of this magnitude, expect to pay 0.5-1% annually for comprehensive wealth management—but the value in tax optimization, behavioral coaching, and estate planning typically exceeds the cost.

Question: What are the earnout provisions in the Travelers Canada deal and how are they taxed?

Answer: Earnouts are contingent payments based on post-acquisition performance. Common structures include revenue targets, customer retention, EBITDA thresholds, or personal retention requirements. Tax treatment: earnouts tied to the value of shares are generally capital gains when received; earnouts tied to ongoing employment may be taxed as employment income. Key risks: Definity Financial Corporation's post-close operational changes may affect your ability to hit targets; definitional disputes can arise over calculation methodology. Negotiate clear measurement definitions and dispute resolution procedures. Consider the present value of uncertain earnouts—a $1M earnout with 50% probability is worth $500K in planning assumptions.

Question: Should I keep my Travelers Canada proceeds in a corporation or take them personally?

Answer: This decision involves trade-offs. Corporate advantages: lower tax rates on investment income (creates deferral), creditor protection, estate planning flexibility, ability to income split with family shareholders. Personal advantages: simplicity, access to TFSA/RRSP contribution room, principal residence exemption for real estate purchases, no ongoing corporate maintenance costs. The "integration" principle means you'll eventually pay similar total tax either way—corporate structures primarily offer timing control and creditor protection. For proceeds of this magnitude, many business sellers use a hybrid: extract enough for immediate needs and registered account contributions, leave the balance in a holding company. Decision should be made with tax and legal professionals.

Question: What estate planning changes should I make after selling Travelers Canada?

Answer: A major liquidity event requires immediate estate planning updates. Within 90 days: (1) Update your will to reflect new liquid assets—trusts may now be appropriate for wealth this significant; (2) Review all beneficiary designations (RRSP, TFSA, insurance, corporate accounts); (3) Update powers of attorney to reflect new financial complexity; (4) Review insurance needs—you may need less life insurance but more liability coverage; (5) If you established a holding company, ensure share structure supports estate planning goals (estate freeze, family trusts). For families with significant wealth, consider family governance discussions—sudden wealth creates dynamics that are better addressed proactively.