When should you consider Participating Whole Life Insurance inside your Corporation?
- You’re a significant shareholder in a Canadian Controlled Private Corporation
- Age 40+ and healthy
- Corporation has excess annual cash flow and/or investment assets not needed for business purposes. Typically, been in business for at least 5 years.
- Want to maximize your estate and transfer assets in a tax-efficient manner
- Looking for stable and predictable asset growth (asset diversification)
Suitability Reasons
The more checkmarks the greater the need for this strategy.
✔️ Business Succession plan in place?
✔️ Reduce tax on corporate investment income?
✔️ Desire to pass corporate assets to a beneficiary?
✔️ Have a corporate life insurance need?
✔️ Own taxable passive investment assets?
✔️ Own corporate investments with a deferred capital gain?
✔️ Want a certain amount of estate value guaranteed?
Comparing a traditional investment to participating whole life insurance while living and at death
Traditional Investment While Living:
- Taxes payable on investment income: Interest, dividends, realized capital gains
- Passive investment income: Pay the highest corporate tax rate, no small business deduction
Traditional Investment At Death:
- Taxes payable on deferred capital gains
- Taxes payable on transfer to shareholders estate
Participating Whole Life Insurance (Alternative asset class) While Living:
- Policy earnings grow tax-exempt up to government prescribed limits
Participating Whole Life Insurance (Alternative asset class) At Death:
- All policy proceeds are paid tax-free to the corporation (no deferred gains)
- Death benefit minus adjusted cost base paid out tax-free to shareholders estate through a notional Capital Dividend Account
Life insurance is Wealth Protection
Total Wealth = human capital + financial capital
