Tax minimization with insurance means using the tax rules for life insurance to keep more of your wealth, for you and your family. In Canada, a beneficiary receives a life insurance death benefit tax-free. In addition, cash value inside an exempt permanent policy can grow without annual tax, within limits. Used well, these features can reduce the tax your estate or corporation pays. For general information on corporate taxes, see the CRA’s corporation tax pages.
Business owners with surplus cash in their corporation can use it to pay for a permanent policy. When the owner dies, much of the death benefit can flow to the family tax-free through the capital dividend account. As a result, corporate dollars do more for your heirs.
Whole life and universal life policies combine lifelong coverage with tax-sheltered cash value growth. They suit people with a long-term need, such as covering the tax on a cottage or a portfolio.
Term coverage is affordable protection for a set period. Although it doesn’t reduce taxes directly, it protects your family’s income during your working years.
Some non-registered annuities qualify as prescribed annuities, which spread the tax evenly over time. Consequently, they can provide tax-efficient retirement income.
Advanced strategies, such as borrowing against a policy for retirement income, suit only a small group of people with high incomes and long time horizons. Regulators have warned against selling them too widely. We’ll always tell you honestly whether a strategy fits your situation.
Our experienced consultants can help you:
Contact Nova Star Insurance Consultants today to discuss your tax minimization goals. The first conversation is free.
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