Protecting Your Family

Let’s face it, raising a family today can be financially challenging.  The cost of living continues to increase, housing costs are rising along with education and extra-curricular activities for our children.  It is tough to make ends meet and still have something left over at the end of each month.

Most families today require both parents to work to afford the lifestyle they enjoy.  Losing one of those incomes through premature death, illness or a disability is a real risk that many families would have a difficult time facing emotionally and financially.

How do you protect your family?

  • Life insurance is designed to protect your family by providing the resource to replace income, pay off debt, and fund future education costs in the event that one of the parents dies.

  • Disability, or income replacement insurance, is designed to replace lost income if an individual is not able to work due to accident or sickness.

  • Critical Illness insurance will pay a lump sum benefit in the event of a diagnosis of many major illnesses.

If you and your spouse work for a company that provides employee benefits, you may already be insured for both life and disability insurance and in some cases critical illness.  Be aware that for the most part, employee benefit programs provide only a minimum amount of life insurance, usually based on one or two years of income.  If long term disability coverage is provided it may be enough for personal needs but that is not always the case.  Each situation is different, so it’s important that you and your spouse review your respective plan information to ensure that you have sufficient coverage in place. There are options to top up your coverage either through your group insurance or individually.

How much life insurance do you need?

If you or your spouse dies, the family will require a lump sum of capital to replace earned income.  You should aim to have enough cash for the following needs:

  • insurance to pay off any outstanding debts and mortgages

  • enough income from the invested capital to replace the lost income

  • an amount to cover future education costs

Think life insurance premiums are too expensive? 

Term insurance is an affordable solution for a growing family with a tight budget.  A 35-year-old non-smoking male can purchase $1,000,000 of ten-year renewable term insurance for less than $45.00 per month. A non-smoking female of the same age would pay approximately $30.00 per month for the same coverage. A relatively small cost to protect a family for $2,000,000 of tax free benefit in the event of an untimely death.

Let’s have a discussion about how we can build a program of protection specifically designed for your needs and circumstances.  Knowing what the needs are and what protection is in place goes a long way to providing peace of mind.

Insurance for Businesses: What You Need to Know

As an entrepreneur, protecting your business is important. You’ve invested your time, energy, and money into creating your new enterprise, which is why it’s so imperative that you take all the necessary steps to protect it.

Regardless of its size or scale, having the right insurance can give you peace of mind, knowing that your efforts won’t be destroyed because of a disaster. This article addresses the different kinds of coverage available for your business and the advantages of each.

Why is Insurance Necessary?

If you are just starting your company, then you’re probably trying to keep costs as low as possible. Adding insurance to the mix at this point might seem premature, particularly if you don’t have a lot of available cash right now. However, consider these potential scenarios and how they could not only impact your business but your family as well.


What happens if you get injured and can’t work? If you’re the lynchpin for your enterprise (i.e., you run most of the day-to-day operations), it would be devastating if you’re not financially protected.

Also, you may have left a full-time job in order to start your own business.  As a result, you might have given up an employee benefit program that included personal disability coverage.  As a business owner you are particularly vulnerable to a disability in that not only may the business be in jeopardy but where would the money come from to sustain your family? Having adequate long term disability coverage and/or critical illness coverage for the benefit of both the company and your family might well be the answer.

Also, consider disability not just for yourself, but for any key employees you may have. What happens if your manager or lead staff gets hurt or sick and can’t work? How are you going to recover the profits that will most likely be lost?


Although no one wants to consider the possibility of sudden death, you never know what tomorrow may bring. If you have a business loan in your name, how will that loan be repaid if you’re gone? Will your family be able to come in and take over if the worst happens? Having insurance can provide peace of mind, no matter what happens.

Natural Disasters

Mother Nature can be devastating if you’re not prepared. Floods, earthquakes, and other disasters can impact your business in a variety of ways. Even if your property is not physically damaged, what if you lose power? What if deliveries can’t get through? If disaster strikes, how will your company manage the fallout until things get back to normal?

What Insurance Do You Need?

Overall, paying for insurance is one of the smartest investments you can make. There are many different options available, so let’s break them down to see which ones are going to have the best impact on your business.

Individual Life Insurance

If you are the key person for your company, then you need life insurance. Whether you’re running all operations, or everything is under your name, being adequately insured can protect your business and your family in case the worst happens. For example, if you provided collateral for your bank loan, a death benefit can help cover that, as well as operational costs, until a replacement is found.

If you own your venture in partnership with someone else, you will want to explore life insurance to buy out each other’s business interest.  Should your partner or fellow shareholder die, it is likely that you will be obligated to buy your partner’s interest from his or her estate.  It is also likely that there would not be sufficient cash to accomplish this.  There are also significant tax benefits in using life insurance to buy out a deceased’s shareholders interest in the company. Life insurance is often the most efficient way to fund shareholder agreements.

Disability Insurance

 Many people overlook this type of insurance, but it can save you and your company if you ever do become disabled and can’t work. Life insurance alone won’t protect against disability, so it is advisable to obtain this type of coverage in addition to any other plan you have in place.

Business Overhead Insurance is another type of disability coverage that is available.  This helps cover the costs of the company’s operating expenses if you’re unable to work and must find a replacement.

Key Person Insurance

 If you have an employee or manager that is vital to your success, key person insurance is a smart move. This way, if that person dies or becomes disabled, the company could receive benefits that will help cover the costs of replacing him or her. You would readily insure your equipment and premises, so why not insure your most important corporate assets – you and your key personnel?

Property Insurance

This kind of policy is not only necessary, but many landlords require that you have a plan before signing a lease. Property insurance can not only protect the building itself but any equipment or other assets inside. Make sure that your policy insures against all kinds of damage, including theft or fire. Also, keep in mind that you will need a separate plan for natural disasters like flooding or earthquakes. There are also policies available that will protect profits lost due to unforeseen events.

Employee Benefits

 While insurance for yourself is crucial, you should also consider providing it for your employees. Having a comprehensive employee benefit program can be an excellent incentive for new hires, ensuring that you bring on and retain the best people possible. Overall, employees are much more willing to work for a company that provides benefits, such as:

  • Extended Health Insurance – having a plan that covers hospital and travel benefits, professional services such as chiropractors, therapists and massage practitioners will be most appreciated by your employees.

  • Vision and Dental – this type of coverage is especially appropriate for employees with a family. The dental coverage can even be designed to include orthodontic benefits.

  • Disability Insurance – government benefits and worker’s compensation don’t always provide adequately for workers.

  • Retirement Planning – if most of your employees are planning on working for the long term, offering retirement plans can ensure that you retain the best of the best. While your company may not be mature enough to consider a Registered Pension Plan, matching contributions to an employee group RRSP may be the answer.

  • Life Insurance – in many cases, businesses offer group plans for all of their employees. However, because these policies usually don’t allow for individual consideration you may also wish to provide the option for your employees to buy additional insurance if they wish.

Bottom Line – take insurance seriously 

No matter what kind of business you’re running, having the right insurance in place can provide you with confidence and peace of mind.

As always, please feel free to share this article with anyone you think may find it of interest.

Do Retirees and Empty-Nesters need Life Insurance?

Now that the kids are out of the house, you should be shifting your focus on retirement. Since your money isn’t going towards feeding, clothing, and supporting your children (hopefully), you should be figuring out the best way to maintain your quality of life once you retire.

One of the biggest variables in this scenario is the fact that it’s impossible to know how long your money will have to last. Whether it’s 20 years or 40 years can make a huge difference, particularly if you’re not earning money from various investments.

With that in mind, we want to discuss how retirees (and soon to become retirees) can use insurance to help provide for their health and well-being well into their golden years. You don’t want to be left in the lurch because you failed to plan. Here’s what you can do.

Life Insurance

Regardless of your circumstances, getting a life insurance policy is always better to do sooner rather than later. While there are still options if you decide to do it just before or after you’ve retired, it’s advisable to apply for insurance when you’re younger and healthier. Plus, it will be less expensive the younger you are.

Nonetheless, life insurance policies are designed to provide financial protection and stability for your loved ones. Even if your children are living independently and making families of their own, there can be many different expenses that you don’t want to pass on.

Funeral costs, mortgages, and other debts can derail your family’s lives if you’re unprepared. Also, if you leave a spouse behind, his or her pension benefits could be greatly reduced upon your death which could severely impair his or her standard of living.

If you’re still relatively young, then you have many different options when it comes to life insurance. Term life insurance can last for a predetermined amount of time (i.e.,20, 30 or 40 years), while permanent insurance such as Universal Life or Whole Life insurance could last for as long as you live. You’ll want to talk with your financial advisor to figure out which option is best for you and your family.

There are some of retirement age who believe that even though they can see the need for additional life insurance, they feel that, at their age, they are too old to purchase it.  This is not the case.  While the premiums will be higher than if they had purchased it when they were younger, it is available to them and it can be shown to make financial sense when one considers the rate of return of the premiums paid compared to an alternate investment in creating the death benefit.

Know Your Retirement Income Options

If you are one of those fortunate to work for a company with a defined benefit pension plan, you will retire enjoying a monthly cheque.  If you have a spouse, it is important for you to discuss with your employer the income and survivor benefit options.  Pick the one that is most appropriate for your circumstances.  For example, if your spouse is considerably younger than you, don’t immediately choose the income option that provides you the highest amount of monthly income without considering what your spouse will live on afterwards.

If your retirement is to be funded by your RSP or RRIF, then consider how long the funds need to last.  Many people retiring today, fear that they will outlive their retirement savings.  Life annuities may be somewhat of an answer but with the low interest environment, they are often discounted as a viable option. Don’t overlook, however, the comfort that a worry-free regular monthly income can offer.

Some retirees will say that they wished that they had started their retirement planning many years before they did. Under these circumstances, hopefully there is another source of retirement income such as non-registered investment plans, inheritances, large equity in the home or re-entering the work force.  Also, in these situations, life insurance could be vital in making sure the surviving spouse has adequate income.  With that in mind, don’t cancel any life insurance upon retirement without considering all the options.

Long-Term Care Insurance

Whether it’s an illness, advanced age, or something else preventing you from being independent, the cost of long-term care (at home or an assisted living facility) can be extremely expensive. This type of coverage helps avoid making withdrawals from your investments which are meant for retirement.  Without it, your retirement funds will be depleted much more rapidly which doesn’t auger well for your surviving spouse.

The problem in Canada is there is only a couple of companies still offering this type of coverage.  So even if you are young (and that is the best time to buy Long Term Care coverage in any event), get it while it is still available.

Although you hopefully won’t have to endure this kind of care during retirement, having long-term care insurance may be a smart idea to protect you and your family if the worst happens.

Bottom Line – Be Prepared

No matter which route you choose, you want to have confidence and peace of mind in retirement. If your finances are not in order, then you could be facing some harsh realities during your golden years impacting your ability to reap the rewards of your hard work. Having insurance can help ensure that your retirement is spent in comfort.

Connect with me if you wish to discuss this further. As always, please feel free to share this with anyone you think will find it of interest.

The Case for Life Insurance

When it comes to most forms of insurance, many people understand the importance of having coverage. Whether it’s your car, your home, or other valuable possessions, having insurance means that you’re financially protected should disaster strike.   One of the first things you do when you buy a new car is to make sure it is protected before you drive it off the lot.  Why? Because if you are involved in an accident chances are good you would suffer financially.

But, what about life insurance?

Although this form of protection works the same way as all other types of insurance, many are reluctant to open the conversation.  Perhaps one reason is that life insurance involves the planning for the worst-case scenario – your death.  The truth remains however, that if someone, your family or your business for example, would suffer a financial loss due to your death, life insurance is the answer.  In fact, life insurance is one of the smartest ways to provide for both yourself and your loved ones.

For today, take stock of your current situation and consider these important reasons why life insurance is needed:

Protect your future insurability

 Even if you are just starting out, perhaps single, with no immediate dependents, life insurance should still be considered.  If your future includes having a family and all the obligations that go with that then your continuing insurability is important. Selecting an insurance plan now that guarantees your ability to purchase more coverage in the future regardless of your insurability will go a long way in protecting your future family. For young people, the cost of life insurance is minimal and could also provide a long-term saving plan growing tax-free that could be utilized later.

Insure your debts

Unfortunately, debt is a natural part of modern life for most Canadians.  The Bank of Canada reports that for every $1 of income earned by Canadians, $1.70 is owed. So, chances are good that you have significant debt, whether it’s tied to credit cards, a car payment, or a mortgage. Ideally, you’ll be able to pay off these debts long before you die. However, should the worst happen, much of that debt will pass to your loved ones.

If you don’t want to burden your family with debt, having a life insurance policy is a wise choice. Not only can the death benefit cover any debt you already owe, but it can help alleviate additional costs, such as funeral expenses.

Provide for your family

If you are married and/or have children, then you owe it to your family to have life insurance.  This is especially true if you are the primary breadwinner in the household. Although most people don’t want to think about what may happen if they pass on at a relatively young age, the fact is that you need to make sure that your family is still looked after financially if that does occur. A life insurance policy can offer peace of mind, knowing that your spouse and children will be provided for no matter what.

Benefit from the tax advantages

If you want a more pragmatic reason for getting life insurance, what about the fact that the death benefit is tax-free?  This fact is the reason why life insurance is used to provide estate liquidity in paying taxes that become payable as a consequence of death. In addition, there are several ways that you can make your policy a haven for any funds that you don’t want exposed to income tax.

If you invest in permanent, cash value life insurance such as Universal Life or Participating Whole Life, the investment growth in the policy is tax-free should you die.  The cash value may also be accessed while you are living.

Transfer assets to children and grandchildren

Establishing cash value policies for your children and grandchildren is a recognized method of both guaranteeing their insurance future while you control the investment portion which is growing tax-free on their behalf.  When the time is right for you to transfer the policy to them, the change of ownership occurs free of income tax.  This is truly a tax-free intergenerational wealth transfer.

Save for retirement

Although life insurance is typically paid out when you die, there are options to take advantage of the money in your policy while you’re still alive.   If you have exhausted other retirement vehicles (e.g. RSP’s, TFSA’s), investing in a Universal Life or Participating Whole Life policy is a method to augment your retirement savings.  Universal Life policies will perform based on the equity or other asset class investment options you select.   Participating Whole Life policies provide stable, increasing returns which are favourable compared to the risk.

Using cash value life insurance for building wealth to be accessed in the future, is a strategy consistent with proper diversification of assets.  The fact that the investment growth in a life insurance policy is tax-advantaged is a definite bonus.

To protect your business

 If you own or operate a business, you most likely are aware of the corporate need for life insurance.    All significant corporate debt should be insured.  In fact, many lenders will insist upon it.  Just like all machinery and fixed assets of a business are insured, so should the key people who contribute to the profits be life insured as well.  If the company or partnership has a Shareholders or Partnership Agreement, they should be funded with life insurance to provide for the transfer of shares or partnership interest from the beneficiaries of the deceased to the firm.

Using cash value life insurance in a private corporation avoids the punitive tax levied against any passive investments in the corporation which, depending on the province, could be higher than 50%.  Tax-free benefits can be paid out of the corporation upon the death of the insured for the benefit of the surviving shareholders or family.

Remember that in addition to you and your family, there may be employees who are dependent on the continued success of your company for their livelihood.  Life insurance owned by the business goes a long way to guarantee this.

To equalize your estate

If your estate includes shares in a business that you may have designated one of your children to inherit in lieu of another child, consider equalizing the bequests by life insurance.  Another example of where life insurance could be used for estate equalization is leaving your primary residence or other real estate (such as a cottage) to a specific child instead of one or more of his or her siblings.  If the other assets being left are not enough to compensate, life insurance should be considered.

To donate to charity

You can provide significantly for your favourite charity using life insurance.  Whether it be by taking out a policy to benefit the charity, by transferring an existing policy you no longer need to a charity, or by just naming the charity as a beneficiary to a life insurance policy prior to your death, you or your estate will benefit from significant tax credits.  Your legacy will be remembered by the fact that your generous act contributed to the charity’s humanitarian endeavors.

Consider how life insurance can fit into your financial plan

Even though some people have a reluctance to think about life insurance, no matter how you look at it, life insurance is a necessary part of modern life. Without it, you could be condemning your family to financial instability. Whether it’s debt, last expenses, guaranteeing your children’s education, providing for income for your family, protecting your business, or tax and estate planning, life insurance provides tax-free dollars when it will be needed the most.  You buy life insurance, not for what it is, but what it does.

Does your Business Qualify for the Small Business Gains Exemption?

As a business owner, you may be aware that when you dispose of shares in your business you could receive an exemption on all or a portion of the capital gains that ordinarily would be taxable. This is due to the Lifetime Capital Gains Exemption which says that, for 2019, up to $866,9121 of capital gains is exempt from taxation.

The Lifetime Capital Gains Exemption (LCGE) is available to individuals who are disposing of or deemed to have disposed of:

  1. Qualified Small Business Corporation (QSBC) shares;

  2. Qualified farm property; or

  3. Qualified fishing property2.

For the shareholder of a small business corporation this valuable benefit could reduce or eliminate the tax bill that otherwise would be payable upon the sale or succession of the company. The important thing to understand, however, is that the exemption is not automatic.  There are some conditions that must be met.  In order for the business to be considered a QSBC and therefore qualify for the Small Business Gains Exemption (SBGE) there are two main rules:

Rule # 1 – Ownership of Shares

During the 24 months immediately preceding the disposition the shares must not have been owned by anyone other than the individual tax payer or a related person;

Rule # 2 – Use of Corporate Assets

Also, during this 24 month period;

  1. 50% or more of the fair market value of the corporate assets must have been used in an active business conducted primarily in Canada;

  2. At the time of the disposition (sale or upon death of shareholder), all or substantially all (defined as 90% by the CRA) of the fair market value of the assets must have been used to produce active business income. Some examples of corporate assets which could put a corporation offside with respect to its being a QSBC are cash, bonds, non-business related real estate and other investments.

In situations where corporations do not qualify for the SBGE due to failing to meet the 90% rule, remedies are sometimes available which may provide a solution.  This will usually involve a “purification” of the corporation to distribute or transfer the non-business related assets.  Some examples as to how this could be accomplished are:

  • Paying a taxable dividend to shareholders;

  • Paying down any bank debt or accounts payable;

  • Pre-paying corporate income tax installments;

  • Purchasing new assets which will be used in the business to produce active business income.

There is another area in which careful attention is warranted.  In order for a business to be a Qualified Small Business corporation it must first be a Canadian controlled private corporation (CCPC).  Should there be a sale of shares to either a non-resident or a public corporation, there may be a denial of the capital gains exemption as the corporation may no longer be a CCPC.  This could also be the case where a non-resident executor is named in the shareholder’s will and the shareholder dies.

The rules governing whether or not an individual who owns shares in a small business corporation receives a capital gains exemption are complex and often confusing.  It is important to obtain professional advice when undertaking the appropriate planning.

If I can be of assistance to you, please do not hesitate to contact me.  As always feel free to share this article by using the share buttons below.


  • The 2013 federal budget increased the LCGE to $800,000 for 2014 with indexing commencing in 2015.  The indexed amount for 2019 is $866,912.

  • The 2015 federal budget increased the maximum LCGE for Qualified farm or fishing property to the greater of $1 million and the indexed LCGE realized on the disposition of qualified small business corporation shares.  When indexing increases the SBGE to $1 million then both SBC shares and farm and fishing property will enjoy the same LCGE.

The Need for Corporate Life Insurance

Life insurance is used for two general purposes in a private corporation – managing risk and creating opportunities.  The risk management function is satisfied as life insurance provides the corporation with a tax-free payment in the event of the death of an owner or someone vital to the success of the business.  As life insurance also allows for the tax-sheltered build up of cash value additional planning opportunities are additionally created.

The primary needs for corporate owned life insurance to satisfy the risk management purpose are as follows:

Key Person Life Insurance

Any prudent business would insure its company facilities and equipment that is used in creating revenue.  It follows then that the business should also insure the lives of the people that run the company and make the decisions which contribute to its profit.  Any owner, manager or employee whose death would impair the future growth and success of the company is a key person and should be insured as such.

The proper amount of key person life insurance should be determined through discussion with the company’s management, life insurance advisor and accounting professionals. This discussion would analyze and estimate the amount of the loss that could occur to the company should a key person die.

Funding the Shareholders or Partnership Agreement

When more than one person join together to own a company or partnership, it is common business practice that there be a Shareholder’s or Partnership Agreement.  These documents set forth the terms and conditions under which the parties co-exist in the business venture.  It also spells out the financial interest that each hold in the concern and how much would be owed to the heirs of a shareholder or partner should that individual die.  The use of life insurance owned by the corporation for this purpose guarantees that sufficient funds will be available to trigger the agreement.  If there was no life insurance in place and no agreement covering how those funds were to be used, the future existence of the company could be in jeopardy.

 To Repay Debt

Like an individual insuring debt to avoid burdening his or her family with outstanding liabilities in the event of death, a business owner should also consider providing life insurance to cover the corporation’s obligations.  This would ensure that the net value of the company is optimized when it passes either to the heirs and beneficiaries of the owner or to a successor owner which might be a family member.

One of the advantages of corporate owned life insurance to retire debt is the existence of the Capital Dividend Account.  Should the insured business owner die, the life insurance proceeds are received tax-free by the company.  The death benefit less the adjusted cost basis of the policy is credited to a notional account – the Capital Dividend Account (CDA).  Even if all the life insurance proceeds are paid by the company to the creditors to retire the outstanding debt obligations, the credit remaining in the CDA can still be paid tax-free to the surviving or successor shareholders.  This allows any surplus or future earnings to be received by the heirs as tax-free capital dividends up to the amount of the balance of the CDA subsequent to the death of the insured.

To Facilitate Business or Investment Financing

Often when a company borrows to invest or for business operations, the bank will require that the principal(s) of the corporation be insured.  In this case, if the life insurance is purchased as a condition of the bank loan being granted, part of the life insurance premiums become tax deductible to the corporation.  The reasons for providing life insurance to cover the bank loans are consistent with the reasons stated in repaying debt, but with the bank’s written requirement for life insurance, there is now a tax deduction available as well.

There also may be a situation where an investor would look favourably on the business owner being insured before he or she invests in the company.  While there would be no collateral insurance deduction in this case, it may create a comfort level for an investor.

To Assist Family Business Succession

With a family business there is often a desire to transition the ownership of the company to the next generation.  One of the common objectives of this transition is to ensure that the company is left financially sound when it is received by the next generation.  This can be accomplished by having life insurance on the first generation owner to guarantee that the company is left financially viable and debt-free should the succession occur as a result of the death of the business founder.

The above items are all situations where life insurance is used by a business for risk management purposes.  When life insurance is held in a corporation it also can result in attractive planning opportunities.  These opportunities include the following:

Estate Planning for the Business Owner

Owners of private corporations in Canada that are qualifying small businesses have the first $500,000 of annual corporate income taxed at a very favourable rate.  For example, in B.C. and Alberta it is 12%.  The low small business tax rate combined with the Capital Dividend explained above presents the business owner with an opportunity to place life insurance designated for estate planning purposes (e.g. paying taxes arising at death from capital gains), in the corporation.

Sheltering of Corporate Investment Income

While the income tax rate on active business income is quite low, the tax levied against corporate investment income is extremely high.  In some provinces, this tax is over 50%.  Using tax exempt life insurance policies to shelter this investment income can provide substantial opportunities to defer taxes which would otherwise be payable.  All the insurance opportunities for risk management itemized above can also be satisfied by using cash value tax-exempt life insurance.  As a result, there are significant planning opportunities available with corporate owned life insurance.

Protecting the Small Business Income Tax Rate

In addition to the above, once a corporation earns more than $50,000 of passive investment income it starts to erode its small business tax limit of $500,000.  Once the passive investment income reaches $150,000 it loses all of the small business limit for that tax year.  This can be avoided by investing in tax-exempt life insurance policies.  Combined with the previous comments not only does the investment grow tax sheltered, it will not impact the small business income limit.

These are the primary reasons why business life insurance is so important.  Not only does it help manage risk, it can also provide significant planning opportunities for the business owner.  I am available at any time, should you wish to discuss how these ideas could benefit you and your company.

If anything should happen to me…

Don and Kate were nervously anticipating Don’s upcoming life saving surgery.  Don was also concerned that, should he not survive, Kate might not know everything that needed to be done upon his death.  The night before his surgery he made this list for Kate of the things she should do if he didn’t make it through the operation: 

My Dearest Kate

Although I expect to make it through this surgery it has got me thinking that anything could happen to any of us at anytime and we are rarely prepared. 

So, if anything should happen……………. 

  1. Before you tell anyone that I didn’t make it– Clean out our safety deposit box and joint bank accounts. Everything is going to you anyhow and when the bank finds out I’m dead, they’re liable to close off all access to them until my will is probated.

  2. Call the funeral director– But go there with somebody who won’t be suckered into buying the fanciest coffin.  Just remember, the money you spend on my funeral won’t be available for the big wake I want you to throw for me!

  3. Gather up all my important papers– My will, life insurance, disability insurance, and general insurance policies, business agreements, banking information, notes receivable or payable, stock or bond certificates, real estate deeds, recent tax returns, marriage, birth and death certificates, military records, automobile registration forms and all recent contracts. Don’t throw away anything that looks official, even if it appears to be terminated.

  4. My passwords are in the bottom left hand drawer of my desk in a note book which should be a big help to you in managing those accounts.

  5. Call our life insurance agent– He’ll not only help you in collecting the money from my life insurance, but also in collecting the death benefits of my group insurance, company pension, social security, as well as the death benefits from my variable annuities.

  6. Call our accountant– He’ll be needed for the various tax returns that must be filed.

  7. Call our attorney– She’ll tell you what other stuff is needed and what must be done to settle my estate.  She’ll also tell you whether my will has to be probated (a process to prove my will is valid).  Our attorney will also advise you on whether there are any federal or state estate taxes. As far as state probate costs, I’ve tried to minimize them through joint ownership of most of our assets and naming beneficiaries where I could.

  8. Call the other executors– You know you are my primary executrix, and you know who the other two are, so call them.  Even though our lawyer will probably call them, it would be nice if they heard from you first.

  9. Call my business associates– My partner will want to know that our buy-sell agreement has just been triggered so he can collect the insurance money to buy my share of the business from you.  And call my assistant Marie in Admin to spread the word.  Ask her if there’s anything else coming to you such as unpaid expense accounts, ongoing group benefits, etc.

  10. DON’T PANIC! I picked my executors and the above-mentioned professionals to assist and advise you in this situation.  So let them do their jobs and help you.  And don’t rush into anything, like selling the house, or anything major, for at least a year.  With my life insurance and all the other benefits coming to you, you can take your time and make better decisions when the time is right.

Fortunately, Don survived his surgery and is on the road to recovery. Don decided that he would attach this list to his will for Kate to refer to in the future, because, well, you never know….

Life Insurance – Do You Buy, Rent, or Borrow?

Without a doubt, life insurance is valuable protection provided by your employee benefit plan, but should it be the only life insurance coverage you have? Probably not, if you want to ensure you have sufficient long term protection to cover all your family’s financial needs should you die unexpectedly.

In a recent study conducted by the Life Insurance and Market Research Association (LIMRA), it was reported that 61% of Canadians hold some form of life insurance. Surprisingly, it also revealed that only 38% of Canadians own an individual life insurance contract. This means that almost 40% rely solely on the life insurance provided by their employer. This can be problematic. The disadvantages of having your employee benefit plan as your only life insurance protection include the following:

It is probably not enough to pay off your mortgage and/or provide income for your spouse and family.

The amount of life insurance protection provided by group insurance in most cases is equal to only one or two times annual income. If this is not enough to do the job, the addition of individual life insurance should be considered.

If you lose your job, you may also lose your life insurance protection.

If you are currently employed in an industry or with a company that may be at risk due to economic conditions, you may find yourself with no life insurance at all.

Upon retirement, or if you leave your job, in most cases you will lose your group insurance. While group life insurance usually contains an option to convert to an individual plan, the plans that are offered are usually restrictive or very expensive.

What place should group life insurance hold in your planning?

To answer that question, let’s first look at the differences that individual life insurance has compared to group. Individual life insurance comes in two forms– term life insurance (which expires at a certain age) and permanent life insurance (e.g. Universal Life or Whole Life) which provides protection for one’s entire life and can also build savings through a cash value.

One can consider the specific type of life insurance, therefore, as being one of three categories:

• Permanent life insurance – the type you own. By paying your premiums each year you build up equity in your insurance. At some point in time, the policy may be fully paid up or self-supporting. You can even take advantage of your equity in the policy by borrowing – similar to borrowing against the equity in your home.

• Term life insurance – the type your rent. Term life insurance usually has a renewal period which could be ten years, twenty years, or even longer. At the end of this period, your “lease” renews for a higher premium (“rent”). When you rent a home you never build up any equity and this is the same with term insurance. After paying all those rental premiums the policy expires at a certain age with no cash value.

• Group life insurance – the type you borrow. You, the insured do not have a contract with the life insurance company as that arrangement rests with the employer. The employer and the insurance company retain the right to cancel the entire benefit plan. As a result, the analogy can be made that your employer is “lending” you the coverage.

In reviewing these three types of coverage, it is advisable that you should have a base or foundation of permanent coverage which would provide protection for life at a fixed cost. This also provides the added advantage of creating equity which could be borrowed against should a future need for cash arise.

You could then consider layering lower cost term insurance to protect a growing family and ensure that there would be enough capital to retire debt and provide for family income. With a family, there is a very high dependency period when the children are young, and the expenses are high. Low cost temporary insurance is used to provide adequate protection during this period. Term insurance also comes with the bonus of being convertible to permanent coverage should you become uninsurable with a far greater choice of options than those with a group life conversion.

Lastly, for those with group life insurance, this coverage can be looked upon as forming part of the term insurance needed or as a top up to provide for contingencies.

Give me a call if you would like to discuss restructuring your life insurance coverage to provide the maximum result. As always feel free to share this article with those you think would benefit from this information.

Get Your Corporate Dollars Doing Double Duty

Owners of very successful private corporations are well aware of the importance of cash flow. Many are protective of how they allocate corporate capital so that business ventures are adequately funded and investment opportunities are not missed.  

The Immediate Financing Arrangement offers an opportunity to provide life insurance coverage and accumulate wealth on a tax-advantaged basis without impairing corporate cash flow.

What is an Immediate Financing Arrangement (IFA)?

An IFA is a financial and estate planning strategy that:

·      Combines permanent, cash value life insurance with a conservative leverage program allowing the dollars allocated to the life insurance premiums to do double duty by still being available for business and investment purposes;

·      In the right circumstances and when structured properly so that all possible tax deductions are used, an improvement in cash flow could result.

Who should consider this strategy?

IFA`s are not for everyone. For those situations that best match the necessary criteria, however, significant results can be achieved. The best candidates for an IFA usually are:

·      Successful, affluent individuals who are active investors or owners of thriving privately held corporations who require permanent life insurance protection;

·      Of good health, non-smokers, and preferably under age 60;

·      Enjoying a steady cash flow exceeding lifestyle requirements;

·      Paying income tax at the highest rate and will continue to do so throughout their life.

How does it work?

·      An individual or company purchases a cash value permanent life insurance policy and contributes allowable maximum premiums;

·      The policy is assigned to a bank as collateral for a line of credit;

·      The business or individual uses the loan advances to replace cash used for insurance purchase and re-invests in business operations or to make investments to produce income. This is done annually;

·      The borrower pays interest only and can borrow back the interest at year end;

·      At the insured’s death the proceeds of the life insurance policy retire the outstanding line of credit with the balance going to the insured’s beneficiary;

·      If corporately owned, up to the entire amount of the life insurance death benefit is available for Capital Dividend Account purposes.

Proper planning and execution is essential for the Immediate Financing Arrangement. However, if you fit the appropriate profile, you could benefit substantially from this strategy.

If you wish to investigate this strategy and whether it can be of benefit to you, please contact me and I would be happy to discuss this with you. As always, feel free to use the sharing icons below to forward this to someone who might find this of interest.