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We are seeing this become a regular problem with our prospects and clients. Individuals have crystalized their retirement and are realizing that they may never spend the entirety of their wealth they’ve created. Further to that problem, is that the assets that they hold within their corporations are in the form of cash, GICs, stocks, bonds, mutual funds, ETFs, real estate, etc.. which are taxed heavily inside the corporation. Without proper planning, more than 60% of that wealth could be lost to taxes when passed on to the next generation.

In our collaborative approach with our client’s accountants and lawyers, we continue to identify and implement the Corporate Asset Transfer Strategy. This is where we use a Corporate Life insurance policy to maximize and protect hard earned wealth into the future.

You see, Permanent Life insurance policies can have an investment component which grows tax-sheltered. This remains true for a policy owned and paid for by a private corporation. Further to that, once the insured passes away, the corporation receives a tax-free death benefit which then credits a notional account called a Capital Dividend Account (CDA). The CDA allows for the corporation to pay a tax-free dividend to the shareholder; yes, you read that right, tax-free.

By shifting some of the assets inside the corporations from their traditional holdings into a life insurance policy we achieve multiple benefits to the client’s situation:

- We introduce a new and conservative investment asset within the corporation, which diversifies and de-risks the overall portfolio.

- The investment component grows tax-sheltered.

- The investment is accessible during one’s life time, so the client is not “tying up” money into a “traditional” death benefit life insurance contract.

- The magnitude of the death benefit traditionally multiplies the amount in premiums which were funded into the contract.

- The death benefit pays tax-free into the corporation and credits the CDA. This allows for corporate wealth to transfer to the next generation tax-free.

In Canada, you ultimately have three beneficiaries which your wealth goes to: CRA, charities, and/or your Family…how much each gets is based on your planning.

We are seeing cases where we are potentially allocating millions of dollars of our client’s wealth (within the firstyear) towards their preferred charity and/or Family instead of the CRA.

If this sounds like a problem you or your family may have, feel free to reach out.

Mutual funds and/or approved exempt market products are offered through Investia Financial Services Inc.
Insurance products are provided through multiple insurance carriers.