Corporate Owned Life Insurance Review

May 8, 2021

Chartered Accountants, Certified Financial Professionals, Life Insurance specialists for decades engaged in strategies to help business owners retain estate value—often to pay off debts relating to potential capital gains tax due—which helped business owners after many years of hard work.

Many other uses are beneficial to business shareholders for numerous applications, such as buy-sell agreements. It also can allow for excellent creative estate planning strategies using life insurance, especially for family business succession planning.

Capital Dividend Account (CDA) strategies changing Where the portion of life insurance proceeds received by a corporation exceeded the cost of the policy, it could be added to the corporation’s capital dividend account (CDA) and withdrawn, tax-free, by the shareholders. The 2016 budget introduced measures that mitigate certain artificial accountancy increases used concerning the amount added to the CDA (partnerships will have similar requirements introduced). There are new rules about the proceeds of disposition received by a taxpayer on the transfer of a life insurance policy to a private corporation.

In the future, consider using life insurance policies outside of corporate CDA or beneficiary arrangements where tax scenarios will soon not be as favourable. In the personal beneficiary realm, you can also mitigate capital gains tax or business agreement payouts aside from using the CDA; plus, by paying beneficiaries directly, heirs can be free of creditor demands, which can deplete an estate, should a company eventually become insolvent.

Corporate-owned life insurance review Feel free to connect with me to discuss these complex changes and look at plans that can be used to adjust life insurance strategies that may benefit you if you are affected by one of these budget changes. Any use of corporate-owned life insurance (regardless if the policy is owned personally or corporately) should be reviewed.



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