Are you aware of the tax implications of accumulating passive income? A tax-exempt life insurance policy may help you efficiently transfer corporate assets to loved ones.
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Helen is a registered business owner in Canada. Her company is successful, so revenues are exceeding expenses, and retained earnings are accumulating. Because Helen is conservative in nature, she invests her retained earnings in conservative investments. Her accountant advised against accumulating passive income in her company due to tax implications, and Helen is concerned her assets may erode over time from these taxes, reducing her heirs’ possible inheritance.
So Helen’s investment advisor and her estate planning specialist at RBC Wealth Management Financial Services spoke with her about a solution called the corporate wealth transfer, a tax-exempt life insurance policy purchased on the life of the shareholder. When this strategy is implemented, the company will be the owner and beneficiary of the policy. When Helen passes away, the proceeds could flow into a Capital Dividend Account, or CDA, and her estate may receive a tax-free benefit from her corporation. Under some conditions, this may help her avoid tax erosion and thereby maximizing the value of Helen’s estate. Talk to a life-licensed advisor or an estate planning specialist today to learn more about the corporate wealth transfer strategy.
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