I Believe Owning Life Insurance Creates Value For My Clients

Insurance of any kind serves two purposes. It protects assets that already exist, by creating liquidity to pay taxes and thus avoiding liquidation of business assets; it creates assets where none existed before – like a young families income needs or additional estate amounts to provide for heirs not involved with the business. Properly applied, life insurance will enhance the value of an estate and it will provide additional liquidity in situations where it is needed.  There is no more cost effective way to achieve either. Whether the problem is known or newly discovered, clients like creative and effective approaches to deal with those problems and opportunities.

There are many situations where life insurance has advantages.

Corporate owned Life Insurance which we call CorpFlow is a unique and highly effective strategy that is specifically designed for a shareholder of a Canadian private corporation that has after-tax profits retained in their company.

Typically, these shareholders leave profits in the company to avoid paying tax on dividends, effectively trapping them from use by the shareholder.  Usually these trapped profits are not actively invested resulting in lower than average investment returns.

In addition, the newly elected federal government has announced a new tax to be levied on high income earners resulting in even less net income to be realized by active business owners.

CorpFlow is a proven strategy that enables a business owner to secure more of their hard earned corporate profits by providing the following benefits:

1) An immediate tax-free withdrawal of corporate retained profits (up to prescribed limits)

2) An opportunity to generate effective investment returns on retained corporate profits through a proven investment strategy that provides good set of circumstances to participate in the upside of equity markets without downside risk! All guaranteed by a major Canadian Bank.

3) A long-term strategy that will provide access, on a tax-free basis, to the accumulated returns generated in #2 above.

4) A way to ensure more of your company’s value is protected should you decide to wind up or sell your business.

Life insurance is a tax efficient way to evacuate money from a holding company to the deceased’s estate.  This is a little more complicated, but suffice it say that for people who have large amounts of liquid capital trapped in a taxable holding company, the saving of 30% of the distribution tax cost would be attractive.

There are ways to structure a life insurance policy so the tax savings are worth more than the cost of the insurance.

New Income tax rules for Life Insurance will come into effect on Jan 1st, 2017 with a significant impact on estate plans. It is important to review your Life insurance strategies to capitalize on the current advantages legislation environment before it ends on Dec 31st, 2016.