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Posts from the ‘Estate Planning’ Category

21
Aug

Optimizing Wealth Through Asset Re-Allocation

If you are an active investor, your investment holdings probably include many different asset classes.  For many investors, diversification is a very important part of the wealth accumulation process to help manage risk and reduce volatility.  Your investment portfolio might include stocks, bonds, equity funds, real estate and commodities.  All these investment assets share a common characteristic – their yield is exposed to tax.  From a taxation standpoint, investment assets fall into the following categories:

Tax Adverse

The income from these investments are taxed at the top rates.  They include bonds, certificates of deposits, savings accounts, rents etc.  Depending on the province, these investments may be taxed at rates of approximately 50% or more. (For example, Alberta 48.0%, BC 49.8%, Manitoba 50.4%, Ontario 53.53%, Nova Scotia 54.0%). Read more

22
May

Life Insurance and the Capital Dividend Account

Many business owners are unaware that corporate owned life insurance combined with the Capital Dividend Account (CDA) provides an opportunity to distribute corporate surplus on the death of a shareholder to the surviving shareholders or family members tax-free.

Income earned by a corporation and then distributed to a shareholder is subject to tax integration which results in the total tax paid between the two being approximately the same as if the shareholder earned the income directly. Integration also means that if a corporation is in receipt of funds which it received tax-free, then those funds should be tax free when distributed to the shareholder.

The Capital Dividend Account is a notional account which tracks these particular tax-free amounts accumulated by the corporation. It is not shown in accounting records or financial statements of the corporation.  If there is a balance in the CDA it may be shown in the notes section of the financial statements for information purposes only.

Generally, the tax-free amounts referred to, are the non-taxable portions of capital gains received by the corporation and the death benefit proceeds of life insurance policies where the corporation is the beneficiary. Read more »

23
Mar

What the Wealthy Know about Life Insurance

If you have ever thought that life insurance was something you wouldn’t need after you reached a certain level of financial security, you might be interested in knowing why many wealthy individuals still carry large amounts of insurance.  Consider the following:

  • A life insurance advisor in California recently placed a $201 million dollar life insurance policy on the life of a tech industry billionaire;
  • Well known music executive David Geffen was life insured for $100 million;
  • Malcolm Forbes, owner of Forbes Magazine, was insured at the time of his death in 1990 for $70 million.

While life insurance is most often looked upon as a vehicle to protect ones family or business, the question that springs to mind is why would individuals with wealth need life insurance?  Read more »

21
Nov

The Corporate Estate Transfer

If you are the owner of a successful company it is likely that you have retained profits or surplus cash in your corporation.  If this is the case, chances are also good that this invested surplus is exposed to a high rate of corporate income tax.  If this describes your company then you may be a candidate for the Corporate Estate Transfer.  This strategy provides tax sheltered growth as well as maximizing the estate value of your company upon your death.

What is a Corporate Estate Transfer?

The Corporate Estate Transfer is an arrangement in which the company purchases a tax exempt life insurance policy on the life of the shareholder using corporate funds that are not needed for immediate business purposes. In doing so, the transferred surplus grows tax-deferred while the death benefit of the life insurance policy increases the value to the estate when the shareholder dies. Read more »