Permanent Cash Value Life Insurance
A multifaceted tool to serve your insurance, investment and tax sheltering needs
Whereas temporary life insurance covers a variety of short term risks, such as providing mortgage protection or income replacement, permanent life insurance not only covers risks but also acts as an important vehicle to maximize estate and retirement planning as well as business succession planning.
Beyond the pure insurance aspect, most policies provide the owner with the option of contributing more money into the policy than is necessary to pay for the cost of insurance (COI). This additional money is invested and grows tax sheltered, similar to an RRSP. The policy holder is limited by certain government guidelines for how much extra money they can contribute, but this amount can be substantial.
Tax sheltered growth • Tax free death benefit • Flexibility for withdrawals
Although the extra funds contributed are not tax deductible, they do grow tax sheltered, and, if not withdrawn, will pay out tax free to the insured’s estate. It is one of the few outright, tax free, intergenerational transfers allowed by the CRA. In addition to the tax free death benefit, the policy owner can access the funds for other purposes prior to death, for example, to pay off a mortgage or supplement retirement income.
The benefits of tax sheltering and eventual tax free payout of the invested funds becomes even more valuable in Corporate Planning, where other tax advantaged plans such as RRSP’s and TFSA’s are not available, graded tax categories do not apply, and all passive investment assets are taxed slightly above the higher marginal personal tax rate.
Tax efficient strategies are available for every individual’s needs. Contact a qualified financial advisor today to explore the options that are right for you.
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