Let's Talk Life Insurance

We don't usually talk about specific solutions in our blog because we are committed to really understanding what our clients want to achieve, and why that matters to them before we make a recommendation. However, there is quite a change about to occur with the taxation of one of the solutions that is commonly considered in a financial and estate plan. In January of 2017 the income tax rules governing the taxation of life insurance are changing. Currently, life insurance contracts can deliver a flexibility and tax efficiency that might surprise you. Here are a few key points you should know:

• Insurance contracts pay at a time when assets are typically transferring to the next generation. This can bring some real advantages, especially when taxes become due and there are cash demands.

• Estate equalization can be a difficult landscape, especially if there have been multiple marriages, children involved in the business, or family risks and challenges along the way. Insurance pay-outs provide a great deal of liquidity (a.k.a. "flexibility") at a perfect time.

• Funding transfers of wealth within a family, addressing taxes, and charitable gifts can require the sale or dismantlement of other assets that typically have imbedded tax issues and valuation discounts, if they're sold at a discount.

• The design of an insurance contract can include asset protection and privacy features that other assets may not be able to deliver.

• The cash value of most insurance policies grow on a tax sheltered basis, similar to that of an RRSP.

• Small business corporations enjoy a notional account called the Capital Dividend Account (CDA) greatly enhances the use of life insurance in a corporate setting.

• This isn't a definitive list, but it's important to know what a tool can do, not just what it's called.

Given the upcoming changes we thought it would be an ideal time to have a session outlining the benefits and opportunities that life insurance offers families and businesses before the rules change. We are excited to host this session Nov 26 at noon at the Glencoe Club. We know you will benefit by attending and hope to see you there! Please RSVP to debbie@familywealthcoach.ca.