Have you heard of an estate freeze but aren’t sure what it means—or whether it’s right for your business? An estate freeze is a powerful tax-planning strategy that allows business owners to “lock in” the current value of their company while shifting future growth to the next generation. Here’s how it works: you exchange your common shares for fixed-value preferred shares on a tax-deferred basis. Your children—or a family trust—then receive new common shares, which capture all the future growth of the business.

Once you have decided on how much life insurance you need, your next decision is whether you are going to use term insurance or permanent insurance to provide it. For many Canadians, while permanent cash value life insurance offers a significant opportunity for them, many initially utilize renewable and convertible term life insurance. Most life companies in Canada offer 10-year, 20-year and 30-year renewable term policies. In deciding which one is right for you, attempt to match the need to the term. While 10-year term might have the lowest entry level cost, the renewal premiums will be substantially higher. If you have a young family, ask yourself, will I still need protection beyond the 10th year? If that answer is yes, then a longer renewal period is more appropriate.

Considering that the proceeds of a life insurance policy are received tax-free upon the death of the life insured, it is not surprising that the premiums for the policy are not tax deductible. There are two circumstances, however, where premiums would be deductible for income tax purposes...