In times like today, when safe yield is hard to find, preferential tax treatment takes on great importance. There are the familiar government-sanctioned vehicles for sheltering personal capital: RRSP/ RRIFs, TFSAs and RESPs. Unfortunately, contribution limits typically leave additional non-registered capital exposed to annual taxation. Tax-exempt life insurance is the lesser known government-sanctioned tax shelter which eliminates not only annual taxation but capital gains tax on payment of the death benefit.

 

Estate Bond – unlimited tax sheltering for your estate

Leaving an estate legacy has its challenges: market risk, taxation, inflation. Tax-exempt life insurance can help minimize these risks. The Estate Bond concept puts the life insurance to the test: how much better is a life insurance policy for creating estate value than a conventional guaranteed investment which is exposed to tax? It compares the results of these two options typically showing a much higher estate value for the insurance option. Alternatively, it can calculate how high a yield the conventional investment must achieve to match the death benefit. It is not unusual for this breakeven yield to be double or even triple current long-term bond rates*. This is the power of tax-exempt life insurance for tax and estate planning. For more information about this strategy please click here.

 

Corporate Estate Bond - a tax-free pipeline out of the corporation

When a corporation is the owner, payer and beneficiary of a tax-exempt life insurance, it carries not only the tax benefits cited above, but adds additional tax savings by allowing corporate capital to be paid out tax-free as a capital dividend and lowering the capital gains tax on the deemed disposition of the corporate shares on the shareholder’s death. The Corporate Estate Bond compares a corporate owned tax-exempt life insurance policy to a tax-exposed corporate investment where the same quantum leap in estate values seen in the Estate Bond is even further enhanced. For more information about this strategy please click here.

 

Insured Annuity – a high yield guaranteed investment

If you are a conservative investor you may be feeling caught between a rock and a hard place: guaranteed yields are so low but you are uncomfortable with investments that carry market risk. An insured annuity takes advantage of the preferential tax treatment accorded both life insurance and prescribed annuities to provide a guaranteed pension stream with an after-tax yield equal to a bond or GIC earning about 7%. The actual yield will depend upon your age and tax bracket. On the death of the annuitant, cash flow from the annuity ceases and all of the invested capital is returned by the life insurance policy to the named beneficiaries tax-free. For more information about this strategy please click here.

 

The Estate Bond and Corporate Estate Bond are trademarked concepts of Manulife but any insurance company’s life insurance product can be used for this strategy.