A Unique Asset Class

A private business owner’s primary objective tends to revolve around the financial strength of the business enterprise; the “goose” that lays those golden eggs. However, at some point the business will mature and there will be excess funds, over and above the needs of the business; it is at this point the successful owner looks to acquire quality assets in order to diversify the personal balance sheet. We do this for ourselves, the pride that comes from doing something well, our family and the community at large. One asset class that is often deemed a cost, or necessary evil, rather than an asset acquisition is life insurance and it often gets overlooked. Life insurance is a unique asset class because it is tax exempt. In a corporate setting the insurance benefit qualifies for Capital Dividend Account (CDA) treatment, effectively converting taxable retained earnings into tax-free capital dividends at life expectancy. If the policy is over funded the cash value can be invested in a variety of ways ranging from guaranteed accounts to indexed market accounts or equities – all tax-exempt. Given the right fact pattern you can protect the insurance benefits from creditors and the cash in a life insurance policy can be accessed for retirement as most Canadian banks accept these policies as collateral. A pure life insurance play is not subject to market fluctuations making it an excellent choice as a succession asset. When considering your options for retirement or succession make an informed decision and take a close look at the many benefits offered by a properly structured life insurance plan; a unique asset class. | Raymond Matt, CFP, CLU, TEP, CHS | The Ontarian, Writer, Editor

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