Taking Care of Business

Funding a Buy/Sell agreement with a Life Insurance Plans has long been the preferred method of businesses and corporations. Simply put, the business or corporation requires immediate liquidity to buy out a partner or shareholders interest at death. These arrangements can be structured many ways depending on the individual situation; Professional Assistance should always be sought prior to implementation.

The most valuable resource that a business has is its’ people. The financial loss to a business at the death or disability of a key employee/owner can be harmful if not devastating to its continued success. Money is needed to provide a replacement for this individual or for the financial loss, which will be suffered by the business. The use of Life and Disability Plans provide the solution.

Loans & Creditor Protection – Should a business owner or shareholder die or become disabled it is vital to make provisions for debts of the business or corporation. Often the loss of a key person will dramatically affect the continued profitability, as well as, the ability to obtain or maintain credit. Banks, lending institutions and suppliers might be hesitant to continuing business with the company. The use of Life and Disability Insurance Plans to avoid this occurrence is advisable.

Whether a successor is a family member, partner/shareholder, or key employee proper planning is vital to the continued success of your business now and in the future. Early planning avoids the added strain caused by re-financing to buy out a retiring owner/shareholder. Universal and Whole Life plans are ideal financial tools for this application due to there ability to shelter funds on a tax-deferred basis.

Corporate Pension Augmentation – The advantage of tax-sheltered growth within a Universal or Whole Life plan allows corporations to structure pension augmentation for executives.

By over funding the insurance requirements the cash value will accrue tax-deferred until retirement, at which time withdrawals can be made or leveraging can be implemented.

Leveraging Strategies – Cash Values from a Universal or Whole Life plan can be assigned to a bank, which in turn provides a line of credit to use for retirement income.

The advantages to these arrangements are that cash values within the plans continue to accrue without taxation. As well, individuals can access their line of credit without having to pay personal income tax. In corporate arrangements the income is taxable to the retired shareholder. However in both cases, if structured properly the interest paid on the line of credit may be tax deductible. Professional Assistance should always be sought prior to implementing any of these arrangements.

In succession planning the question of Fair vs. Equal comes up in a large number of situations. If an owner/shareholder leaves a business asset or a company to one child; what is a fair treatment for a non-participating children? Death benefits from a life insurance plan can be used to provide a fair equalization solution. The amounts can be selected by the owner/shareholder, which would alleviate the added pressure, complications and financial burden to his or her successor.

Should a business owner or shareholder die or become disabled it is vital to make provisions for debts of the business or corporation. Often the loss of a key person will dramatically effect the continued profitability, as well as, the ability to obtain or maintain credit. Banks, lending institutions, and suppliers might be hesitant to continuing business with the company. The use of Life and Disability Insurance Plans to avoid this occurrence is advisable.

Capital gains tax in Canada not only applies to shareholders while living but also at their death. Growth of business assets above the adjusted cost base becomes taxable at the capital gains rate. Over time these gains can become a significant hidden tax bill. Life Insurance plans can be designed to provide a solution.

Professional Assistance should be sought in determining the projected capital gains and the possible tax bill.

Many privately held corporations in Canada accumulate income, which becomes trapped in the corporation. If this surplus is invested and gains are obtained they become taxable at a very high rate.

Shareholders and professionals can use Universal Life or Whole Life Insurance to avoid this annual taxation and provide liquidity for creditors and tax liabilities through the insurance proceeds. Cash values can accrue tax-deferred in a wide array of investment options. Pension augmentation or leveraging strategies can be implemented in the future to benefit the shareholders or professionals.

Corporate Pension Augmentation – The advantage of tax-sheltered growth within a Universal or Whole Life plan allows corporations to structure pension augmentation for executives.

By over funding the insurance requirements the cash value will accrue tax-deferred until retirement, at which time withdrawals can be made or leveraging can be implemented.

Leveraging Strategies – Cash Values from a Universal or Whole Life plan can be assigned to a bank, which in turn provides a line of credit to use for retirement income.

The advantages of these arrangements are that cash values within the plans continue to accrue without taxation. As well, individuals can access their line of credit without having to pay personal income tax. In corporate arrangements, the income is taxable to the retired shareholder. However in both cases, if structured properly the interest paid on the line of credit may be tax-deductible. Professional Assistance should always be sought prior to implementing any of these arrangements.

Universal Life has become a vital tool in tax planning strategies. In addition to providing liquidity with tax-free death benefits, Universal Life also offers tax-deferred accumulation with a wide array of investment options. Preferred tax treatment and flexibility allow for income sheltering and retirement augmentation.

Cash Values from a Universal or Whole Life plan can be assigned to a bank, which in turn provides a line of credit to use for retirement income.

The advantages to these arrangements are that cash values within the plans continue to accrue without taxation. As well, individuals can access their line of credit with out having to pay personal income tax. In corporate arrangements the income is taxable to the retired shareholder. However in both cases, if structured properly the interest paid on the line of credit may be tax deductible. Professional Assistance should always be sought prior to implementing any of these arrangements.

Income Sheltering – Universal Life has become a vital tool in tax planning strategies. In addition to providing liquidity with tax-free death benefits, Universal Life also offers tax-deferred accumulation with a wide array of investment options. Preferred tax treatment and flexibility allow for income sheltering and retirement augmentation.

Leveraging Concepts – Cash Values from a Universal or Whole Life plan can be assigned to a bank, which in turn provides a line of credit to use for retirement income.

The advantages to these arrangements are that cash values within the plans continue to accrue without taxation. As well, individuals can access their line of credit with out having to pay personal income tax. In corporate arrangements the income is taxable to the retired shareholder. However in both cases, if structured properly the interest paid on the line of credit may be tax deductible. Professional Assistance should always be sought prior to implementing any of these arrangements.

• providing benefits tailored to fit the needs of the employer and employees.
• integrating benefits with government programs where appropriate.
• providing benefits which are tax effective.
• communicating the value of the benefit program to employees (meetings, booklets).
• providing fast and efficient service.