When Should You Consider Purchasing Corporate Whole Life Insurance

You’re a significant shareholder in a Canadian Controlled Private Corporation Age 40+ and healthy Corporation has excess annual cash flow and/or investment assets not needed for business purposes.

Typically, been in business for at least 5 years. Want to maximize your estate and transfer assets in a tax-efficient manner Looking for stable and predictable asset growth (asset diversification)

Suitability Reasons

The more check marks the greater the need for this strategy.

Business Succession plan in place?

Reduce tax on corporate investment income?

Desire to pass corporate assets to a beneficiary?

Have a corporate life insurance need?

Own taxable passive investment assets?

Own corporate investments with a deferred capital gain?

Want a certain amount of estate value guaranteed?

Comparing a traditional investment to participating whole life insurance while living and at death

Traditional Investment

While Living:
Taxes payable on investment income: Interest, dividends, realized capital gains
Passive investment income: Pay the highest corporate tax rate, no small business deduction

At Death:
Taxes payable on deferred capital gains
Taxes payable on transfer to shareholders estate

Participating Whole Life Insurance
(Alternative asset class)

While Living:
Policy earnings grow tax-exempt up to government prescribed limits

At Death:
All policy proceeds are paid tax-free to the corporation (no deferred gains)
Death benefit minus adjusted cost base paid out tax-free to shareholders estate through a notional Capital Dividend Account