CORPORATE ESTATE BOND … A CLIENT PROFILE
What is it?
The Corporate Estate Bond is a financial planning strategy designed to increase the size of your client’s estate by moving surplus corporate dollars exposed to tax into a tax-deferred life insurance policy.
Who is it for?
- shareholder of a private Canadian Corporation
- in good health
- age 45 and older
- strong desire to leave a legacy at death
- receptive to long term planning strategies
- a Corporation with surplus funds available to invest
How does it work?
Your client’s Corporation purchases an exempt life insurance policy, with your client as the life insured and the Corporation named as beneficiary. The Corporation deposits amounts into the policy in excess of what is required to pay the policy charges, creating cash value. The cash value accumulates on a tax-deferred basis that may increase the death benefit payable under the insurance policy. At death, the Corporation receives the life insurance proceeds tax free. The Corporation receives a credit to its capital dividend account for the amount of life insurance proceeds less the insurance policy’s adjusted cost basis. Capital dividends may then be paid tax free to your client’s estate.
Why does it work?
- provides life insurance protection which increases the size of your client’s estate today and into the future
- opportunity to create cash value that grows on a tax-deferred basis that may increase the insurance
- proceeds payable at death
- by moving funds into a life insurance policy, the amount of tax payable by the Corporation will be reduced
- insurance proceeds received by your client’s Corporation, generate a credit to the Corporation’s Capital Dividend Account
- the life insurance proceeds can be paid tax-free to your client’s estate via a tax free capital dividend and distributed to heirs or favourite charity, as directed in the client’s will.
An Example …
In the following example, your client is a male, non-smoker, 54 years old. His Corporation will invest $30,000 per year for the next 10 years at an assumed rate of 4%. He has earmarked this investment for his children when he dies. The corporate tax rate is 47% and his personal dividend tax rate is 35%. By starting with $750,000 of initial death benefit, here’s how the Corporate Estate Bond can increase the size of the gift when he dies.
Why Choose Manulife?
- Leading edge life and living benefits products
- Tax and estate planning expertise and support on complex tax and estate planning issues
- A Canada-wide team of experienced actuaries can help you understand all the aspects and implications of the product your client is considering
- Facilitators in the underwriting process to get your clients’ large cases through underwriting as quickly and as smoothly as possible
- Marketing support to develop customized solutions to help you make the sale
