How Life Insurance can be Used as a Living Beneft
Estate Bond
What is it?
- A tool which increases the value of funds earmarked for your heirs.
How does it work?
- Funds have been designated to be passed onto your heirs.
- These funds are deposited into an insurance contract.
- Funds grow on a tax-sheltered basis in addition to the insurance death benefit.
- Upon death, the proceeds are paid out to your designated beneficiary tax free.
- The proceeds, as a result of tax-sheltering are in excess of the amount they would have grown to had they been invested outside the insurance policy.
Joint Last to Die
What is it?
- A tool to maximize the value of your estate asset.
How does it work?
- An insurance amount is purchased equal to your tax liability.
- Upon second death, insurance pays tax liability.
- Heirs can maintain the assets and are not forced to liquidate the assets to pay taxes
(ie. cottage, stocks).
- Insurance cost is lower on two lives vs. one life.
Charitable Gifting Life Insurance
What is it?
- An opportunity to provide a donation to a chosen charity and provide tax relief for you either today, or in the future.
How does it work?
- An insurance contract is purchased equal to your chosen donation amount.
- Depending on structure, tax credits can be made either annually on the insurance
premium or at death on the insurance death benefit.
- Tax credits are used to reduce taxes paid.
- Upon death of the insured, insurance proceeds are paid to the charity named as
the beneficiary.
Insured Retirement Program
What is it?
- A tax-effective way to provide a future income stream.
How does it work?
- Deposits are made to an insurance contract.
- Funds grow on a tax-sheltered basis.
- Contract is assigned to the bank in exchange for advances.
- Loan advances provide tax-free income.
- Upon death, the loan is paid with tax-free proceeds.
- Net insurance proceeds are then paid to named beneficiary.
Pension Maximizer
What is it?
- A tool to maximize the value of your pension for both you and your spouse.
How does it work?
- A 100% pension option is chosen our of your pension plan.
- An insurance contract is purchased on the pensioner.
- Pension income is maximized.
- Insurance proceeds provide larger survivor pension.
- Heirs receive the residual of the proceeds after death of second spouse, and therefore do not get excluded from pension proceeds.
RRIF Insurance
What is it?
- A tool to maximize the value of your registered assets left in your estate.
How does it work?
- Upon death of last spouse, Revenue Canada is entitled to tax on your registered
assets.
- An insurance policy is purchased for an amount equal to your tax liability.
- Insurance is on a Joint Last to Die basis for cost effectiveness.
- Upon second death, the insurance pays out your tax liability.
- Because the insurance costs less than your liability, more assets are left in your
estate for your heirs.
