Minimize and defer taxes

Cover tax liabilities at death

Our Canadian income tax rules allow a spouse to defer tax liabilities by leaving his/her estate to a surviving spouse, but eventually the tax must be paid. The use of permanent life insurance payable upon the second death is an excellent way to take care of this eventual tax bill to the estate because it is payable exactly when needed (at the time of death), is tax free, and can be purchased with discounted dollars. It may also assist with the following:

  • Recreational property

A summer cottage or winter retreat held for a number of years may have significantly increased in value. Unfortunately, 50% of the capital gain is taxable when you pass it on to your children – before or after your death occurs. This can be a problem because the tax will have to be paid from the sale of other assets or investments unless you insure this tax liability.

  • Real estate investment property

This type of investment, if held for a number of years, can generate very substantial deferred tax liabilities from capital gains and capital cost allowances for depreciation.

  • Business

The growth in the value of a business will generate tax liabilities, but the sale of a business at death for its full value may be very difficult. Yet, the Canada Revenue Agency (CRA) will still want the tax payable on the capital gains. There may also be a need to buy out a business partner.

  • RRSPs, RRIFs, LIFs, Pension Plans

All of these registered plans become fully taxable at the time of death when left to someone other than a spouse, and will shrink in value by almost 50% after the tax bills are paid. Life insurance can cover the tax payable, thereby preserving the full value of your investments for your heirs.

Provide benefits to charities:

There are many creative ways to use life insurance to provide substantial legacies through your favourite charities. It is possible to get a charitable tax credit for the premiums paid for a life insurance policy, or to get a tax credit for the full amount of the death benefit of a policy to offset other taxes payable in your estate such as from RRSPs or RRIFs etc.  There are also tax incentives for donating securities in kind, whereby the ownership of the asset is simply transferred to the charity.

Provide a lifetime GIC:

This strategy combines the use of life insurance and a life annuity to provide an enhanced guaranteed lifetime income while returning all of the capital to the estate tax free at the time of death.

Tax shelter current investment assets (estate bond):

Many of our clients will never spend their entire capital during their lifetime and the use of life insurance estate bonds is a great way to tax-shelter investment growth today to provide for an enhanced tax-free benefit to your children or charity at the time of death.

"I am entirely satisfied and thankful to have the interest and help from Rogers Group Financial through my very much appreciated advisor."

Shirley J.