|
Typically, business owners and families view life insurance as a protective shield against the liabilities and losses created by an accident, illness or unexpected death.
Entrepreneurs who incorporate life insurance into their financial plans understand that Canadian life insurance can also provide attractive, tax-advantaged investment returns, too. A life insurance-based strategy is one of the best kept secrets in our country for creating and retaining wealth. |
|
For the goals of creating high investment returns with lower risk and increasing estate liquidity, a permanent life insurance policy can be an effective alternative investment vehicle.
In a bit of tax detail, the insurance-wrapped investment into the selected mutual fund or fixed-income fund grows tax free each year, the death benefit payout of the policy flows tax-free to the policy owner (holding corporation), and the associated credit to the capital dividend account allows tax-free dividends to the shareholder's estate or surviving shareholders. In June 2024, the federal government increased the capital gains inclusion rate from one-half (50%) to two-thirds (66.7%). In light of this change, investing in Canadian life insurance has become an increasingly attractive investment opportunity for business owners, shareholders, and their families. |
|
In organizations with multiple owners, a buy-sell shareholder's agreement supported by life insurance placed on each owner prepare the business for the loss of a shareholder while minimizing the impact on the surviving shareholders, company employees, and business operations.
In the event that a co-owner passes away, the buy-sell agreement defines the process for the continuity of the business while the death benefit payout of the life insurance policy ensures that funds are immediately available to purchase the deceased's value of the business. Finally, key-person life insurance placed on the owner, top executive or individual critical to the business provides a financial safety net should the sudden loss of that important individual have profound negative impacts on a company’s operations. |