When people think of Life insurance they normally associate it with providing the financial support your family will need if you are no longer around to take care of them. However, life insurance can also help you and/or estate preserve wealth, here are four examples how;

 

Pay the Tax Man

Taxes are usually owed upon death for assets such as a family cottage or non-registered investments as they are ‘deemed sold’ when the owner dies and capital gains are realized. The tax liability might occur when the asset owner dies, or when the spouse dies. Since life insurance proceeds are also paid on death, they provide cash to pay the taxes. That way, your beneficiaries won’t have to sell the asset to pay the tax man.

 

Fund a Charitable Gift and Trigger a Tax Receipt

Life insurance can fund a charitable donation and trigger a large tax receipt when you pass away. You can name the charity of choice as your beneficiary, so the insurance proceeds will be paid to the charity directly, instead of into your estate. You will receive a large tax receipt to off-set taxes owing on your final tax return.

 

Insure Your Children to Protect the Wealth Transfer to Your Grandchildren

Afraid the kids are going to spend all the money and leave nothing for your grandchildren? Take out a life insurance policy on your children with your grandchildren as the beneficiaries. This is a common way to transfer wealth efficiently and effectively through the generations. You can set up the premiums to be paid up by the time you pass; this way your grandchildren aren’t stuck paying the premiums after you’re gone.

 

Use Life Insurance for Retirement Planning

The tax-exempt accumulation of cash in a Universal Life Insurance policy can function like an RRSP on steroids. When you retire, you can access the funds through a collateral assignment of the policy to a lending institution (put the bank as the beneficiary) in exchange for a tax free loan to supplement retirement needs.

 

To learn more ways to use Life Insurance to create and/or your preserve wealth give me a call.

Have a great weekend,

 

Tracey

 

 

 

Please note: Insurance is not a business of Security Financial Services but is placed through Qualified Financial Services. MT 08-15017

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