Key Understandings
- For business owners, a Legato plan can be implemented inside their private corporation, family holding company, or family trust. Like an RRSP, RESP and TFSA, a Legato plan is a tax-efficient strategy.
- Every estate freeze should be combined with a Legato plan to create the most tax-efficient method of covering the future estate taxes due from that freeze.
- The death benefit payout of a Legato plan flows tax-exempt to each beneficiary. If the policy is corporately-held, that death benefit payout would be received free of taxation inside that corporation or family holding company.
- In addition, the policy-owning corporation would receive a CDA credit that allows tax-free dividends to the shareholder(s) or their estate for some or perhaps all of that death benefit payout.
- A Legato plan can considered as a TFSA-like investment account inside an operating or holding company. The annual dividend yield of ~6% for that investment inside the Legato plan would be exempt of passive income tax.
- An existing term insurance policy that has reached the end of it's policy term may still have considerable value to the owner. That policy holds a pre-approved lifetime of life insurance coverage to a long-term wealth strategy for family, estate, and investment benefits even if the life insured has reached a health condition in which they would otherwise no longer be insurable.
- Canadian carriers are not all equal. The companies differ in many different ways. Legato works with Canada's four top life insurance carriers to ensure our clients get the best offer available.
- A couple in their late 70s can be insured together, even if one person is not healthy enough to be insured individually. An individual in their early 70s can be insured if healthy.
- A person who has survived cancer, or lives with Parkinson’s disease or diabetes, may be insurable.
- One can be insured for skiing out of bounds, scuba diving or rock climbing, at moderate levels and when adhering to weather and safety warnings.
Every five years or so, take the time to update the will, power of attorneys (health, financial), and shareholder’s agreement.