Transferring Wealth Using Universal Life Insurance
Life Insurance Gifting Strategies
Gifts of Life Insurance in Windsor-Essex are sometimes under utilized. We often think of life insurance as the transfer of wealth at death, but did you know that it can also be used to transfer wealth, free of taxes, at important life events?
At Scott Mallender Insurance, we develop wealth transfer strategies that allow you to use life insurance to transfer wealth to your children, grandchildren, or loved ones in a tax effective way – all while maintaining control of this wealth until it is transferred.
Our insurance gifting strategy allows you to create virtually a second tax free savings account within a Universal Life policy. This controlled and creditor protected policy can help your student or young professional to enhance their limited pension opportunities. Securing sufficient room to contribute to a non-registered pension is something I believe will be extremely important for the millennial generation.
How Does Life Insurance Gifting Work?
Throughout your life successes you have accumulated excess wealth you would like to efficiently transfer to a loved one. To do this, you purchase a Universal Life insurance policy on the life of these loved ones. As the owner of the policy, you chose the optimal amount of over funding. Once we have determined this annual or monthly number, I will create an onshore tax shelter for that loved one, for only the cost of life insurance.
With my experience, over the next 10 years I can guide you to ensure that you maintain this shelter, in its proper order, throughout the life of your loved one. The insurer, working in accordance with CRA, will automatically generate an annual report that we will review each year. Now is the best time to capitalize on all the advantages of the current legislation.
WHY DOES INSURANCE GIFTING WORK?
- life insurance protection on the life of your loved ones-children, grandchildren, students and aspiring professionals
- tax-free death benefit
- tax-sheltered growth of all eligible over funding
- ability to transfer future ownership of the policy to your loved one on a tax-free rollover basis
- after the transfer, the loved one must name a preferred beneficiary in order to maintain the policy’s tax exemption and creditor protection
- Scott’s experience also has an alternative strategy to joint ownership to maintain the above benefits for life
Example of Life Insurance Gifting
- *Preferred beneficiaries are designated by CRA as follows: spouse, mother, father, sons, daughters, and grandchildren. NOT ESTATE OR PARTNERS
- These beneficiaries will provide Creditor Protection for your UL policy for life, from anyone or anything.
- Your UL policy is a privately designed Estate Tool between you and the insurer. No reporting is ever required after initial vetting of medicals and financials.
- This policy is a separate investment not considered part of your Estate. Therefore, it will avoid the ever increasing Estate and Ontario probate taxes.
- Gifting– UL policies are essentially a second, much larger TFSA with creditor protection for life.
- Monies can be deposited from any after-tax source throughout each year up to the policies annual maximum.
- Beneficiaries can be re-arranged and added at your discretion.
- Joint ownership is a grandfathered approved strategy in maintaining control of this lifelong financial asset.
- There are no surrender charges after the first 10 years – *no further charges for your life.
- After 10 yrs. partial withdrawals are available much like any bank account.
- Your policy can be preset to maintain a minimum amount of Ins. in order to preserve its lifelong Tax –Exempt Status.
- All investment growth inside this UL is Tax Free and has no year-end reporting requirements.
- Annually, CRA and the insurer automatically recalculate the upcoming year’s maximum deposit.
- Annual maximums vary on the MTAR insurance setting and the previous year of deposits.
- The 7th year anniversary is an important milestone (Anti-Dump-in, 250% rule). I specialize in helping you strategize these first 7 years to maximize your future generous tax-free savings account.
- My choice of Universal Life includes these unique benefits:
- No MER’s from any of the 50+ third-party Mutual Funds offered.
- Included, a 30 day waiver of COI premium upon disability, indefinitely.
- Compassionate assistance (50%)
Scott Mallender is a Gold Elite Insurance Broker who works with fifteen of the top Canadian Life Insurance companies. His associates include a network of tax, retirement and estate planning lawyers, accountants, underwriters, and actuaries.