Life insurance is commonly thought of as a simple estate planning tool. Yet it can also make a very powerful investment tool due to its favourable tax treatment.
Deposits and cash growth in life insurance policies are generally tax-free within certain limits, as are death benefits, which makes life policies used as investments very valuable.
On January 1, 2017 the part of the Canadian Income Tax Act governing life insurance policies will be amended to more accurately reflect changes in mortality rates (people are now living longer). It will also place additional limits on life insurance deposit amounts considered tax exempt.
If you decide to take advantage of life insurance for investment purposes and estate planning before these tax changes take place, your life policies will be grandfathered and provide you with the ability to invest more money tax-free than life policies purchased in 2017 and beyond.
There are many situations whereby you should consider investing in life policies before December 31, 2016. A couple of key situations include:
- Your business is growing. Insurance taken out on the owners can create or strengthen succession plans to insure the business won’t suffer when key people are unable to continue working for any reason.
- You own properties whose value has grown beyond the capacity of your estate to cover estate tax obligations. It’s possible that capital gains taxes will not allow you to have your estate assets distributed in the way that you’d like. Life insurance can be purchased to cover big tax hits such as these, and allow you to leave more to loved ones and charities.
If you’ve already set aside specific funds to go to beneficiaries such as your spouse, grandkids, kids, community causes and charities, Bequest Insurance’s Generosity Multiplier™ can mobilize those funds to guarantee that your beneficiaries receive even more than you hoped, at no additional cost to you.
Rates of return on our Generosity Multiplier™ are based on age, and since none of us are getting any younger and tax changes are coming on January 1st, this could be the perfect time to contact Bequest Insurance to learn more about how you can reduce your taxes and leave more to meet your personal or business needs!