The Capital Dividend Account

The capital dividend account (CDA) is a notional corporate tax account specifically setup for the purpose of  tax-free dividends. 

Upon the passing of the life insured, the payout of a Legato plan can create significant credit to the capital dividend account (CDA), allowing up to 100% of the policy payout amount to be issued as a tax-free dividend to a shareholder.

Corporate Legato Plan: Owned by corporation, holding company or family trust. 
Premium monies deposited into the Legato Plan: Paid by the policy owner.
Annual Yield on Corporately-Held Policy: Grows tax-free and not counted as passive income.

Life Insured Passes: Payout of Legato plan goes to the legal owner, which also receives a large CDA credit.
Dividend to Shareholder(s): Most if not all of Legato Plan can become dividend to shareholder(s), or an Estate, tax-free.
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Typical ROI on corporate premiums deposited into the Legato plan: In excess of 10%*.
Typical ROI on corporate premiums deposited into the Legato plan when considering CDA credit: In excess of 15%*.

* Healthy life insured age 50.

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More details on Legato plans for Incorporated Professionals, Companies and Trusts

Legato Plans for Individuals and Families

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Each Legato Plan is based on the principal Canadian Federal Income Tax laws and regulations relevant to policyholders resident in Canada for policies issued after 2016. Tax laws are subject to change.