Minimize Taxes
Learn how to hold on to more of your assets.
Our wide range of solutions can help you defer, minimize and, at times, eliminate taxes.
Insurance solutions are ideal to safeguard the value of your assets in a tax-efficient manner. Tax-exempt life insurance shares certain characteristics with other types of investments, however no other asset allows for all of the following:
  • tax-deferred growth, much like within your registered pool of capital
  • potential for tax-free income during retirement
  • tax-free distribution on death

Grow Assets on a Tax-Sheltered Basis

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.
The combination of insurance benefit and tax-sheltered growth allows you to enhance the amount of wealth you pass on to your family. The after-tax rate of return for your estate is often significantly higher than what is attainable with fully taxable investments.

Minimize Estate Taxes

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 necessary funds.

Create a Tax-Preferred Income Stream

Life annuities can be very useful in providing a guaranteed, lifetime, tax-preferred income that may be higher than what is generated from a more traditional income vehicle. The major drawback to this strategy is the loss of your capital; however you can solve that problem by purchasing a life insurance policy with a death benefit equal to the purchase price of the annuity, replacing the cost of the annuity upon the insured's death. This strategy creates the same result as purchasing a GIC, but with a more tax-efficient income stream. In fact, the pre-tax equivalent return is often higher than the yields available on GICs or bonds.
Another way of generating tax-preferred income is by utilizing the accumulated value within a tax-exempt life insurance policy. That value can be used as collateral for a line of credit in retirement, which would create tax-free access to funds and that would be repaid at the time of death when the benefit becomes payable. This strategy creates tax-free growth, tax-free income, and a tax-free payout.

Charitable Giving

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. Insurance solutions for charitable gifting include annuities, life insurance, and wealth replacement plans.

Business Strategies for Minimizing Taxes

In the case of a corporation, there are ways that insurance can actually reduce taxes that would otherwise be payable. Not only can you create a larger corporate asset by moving investment dollars or retained earnings into a corporately owned tax-exempt life insurance policy but you can also create tax-free dividends for the estate rather than taxable ones. In some cases, the capital gains tax on the disposition of shares may also be reduced by employing an insurance-based strategy.
Lower business tax rates may also allow you to fund insurance premiums with fewer pre-tax dollars through corporately owned insurance versus individually owned coverage. As well, insurance can play a key role in executive compensation planning, providing key benefits to both employer and employee.

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