Leave A Legacy
Learn how to leave more behind for your loved ones

While assessing your plan for retirement and beyond, one element you're likely considering is the legacy you will leave your loved ones. The key to effective estate planning is to minimize estate tax and maximize the amount of wealth that is transferred to the next generation. But how? Life insurance offers a unique approach.

Maximize the Value of Your Estate

By shifting a portion of your assets from fully taxable investment vehicles (such as GICs, bonds, or cash) into a tax-exempt insurance policy, you can significantly enhance your estate plan. The investments you make in a life insurance policy grow on a tax-deferred basis during your life, and at death are paid to your beneficiaries tax-free. Your family benefits from continual insurance protection, a reduction in your ongoing tax liabilities, and a typically much larger estate for your heirs. family cottage, will also be subject to capital gains tax. These taxes are unavoidable; however using insurance proceeds to pay for them is often a lower cost - and more desirable - option than selling assets or borrowing the funds.

Protect your Estate Against Taxation

Registered investments like RRSPs and RRIFs become fully taxable on the death of a surviving spouse, and gains on other investments or valuables, such as the family cottage, will also be subject to capital gains tax. These taxes are unavoidable; however using insurance proceeds to pay for them is often a lower cost - and more desirable - option than selling assets or borrowing the funds.

 

Create an Estate Value

Life insurance can be used to create estate value where none previously existed. This is critical in managing risk for families and business owners. It is also a useful tool in equalizing estate payments in situations where there may be a specific asset, such as a business or farm, that is passed on to one child and is significantly more valuable than assets passed on to other children.

Charitable Giving

For individuals who are committed to making a meaningful legacy, planning a charitable gift is part of a comprehensive philanthropic plan. The gift of life insurance can be effective in providing a practical and affordable way to make sizeable charitable gifts to your favourite charities or private foundation. Not only will life insurance help increase the size of your gift, in most cases it will provide significant tax benefits, both for individuals and business owners. Insurance solutions for charitable gifting include annuities, life insurance, and wealth replacement plans. Developing a charitable plan utilizing insurance solutions that are integrated into your financial plan and reflect your investment objectives will allow you to create a true legacy.

Business Strategies for Creating a Legacy

For business owners, life insurance can be a critical component to a well developed succession plan. If the intention is to pass on the business to the next generation, life insurance proceeds can be used to pay the tax liability on corporate shares, ensuring that business assets need not be sold. Additionally, insurance can be used to provide the necessary funding for the next generation to purchase shares from the estate in a tax-effective manner.

Insurance can also help to create larger corporate assets through moving investment dollars or retained earnings into a corporately owned tax-exempt life insurance policy and creating tax-free dividends for the estate. In some cases, the capital gains tax on the disposition of shares may also be reduced by employing an insurance-based strategy.

 

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