Insurance Solutions

If you've looked at life insurance before, look again...

It used to be that people bought life insurance for one of two reasons:

• to cover final expenses;
• to provide income for their family after death.

While life insurance still does these things, today it has also become an important tool in estate planning and reducing taxes. There are a variety of products on the market, such as Universal Life insurance, that provide innovative solutions to fit your needs. Here are two situations where a life insurance policy can really pay off.

Example 1: The Family Cottage

If you own a cottage, you may wish to pass it on to family members so future generations can continue to enjoy it. However, you will have to pay tax on any increase in the value of that property before family members take possession of it. This is where life insurance can help: the insurance benefit will be paid to the recipients (if they are the designated beneficiary (ies)) upon the death of the last deeded owner and the benefit can then be used to pay any capital gains taxes due on the property. The advantage of getting a life insurance policy for this type of situation is that the insurance premiums will be much less expensive than using savings or other forms of financing. Premiums could be as low as 1% or 2% of the amount of insurance.

Example 2: Your Retirement Nest Egg

Many people contribute to an RRSP every year to save for retirement and reduce their taxes. Down the road, they must cash their RRSP or convert it to either an immediate annuity or a registered retirement income fund (RRIF). You must start withdrawing income from your RRSP by the end of the year in which you turn age 71.

If you've planned well, you may find that the money in your RRIF continues to grow. You may never spend all of the funds you've accumulated and you may want to leave that money to your loved ones. . . But, what happens when you die? The government will treat the remaining funds in your RRIF as if they had been cashed in on the day you died and will tax your estate accordingly. This could mean as much as 50% of the value of your RRIF going to taxes. This is why many people purchase life insurance. Its benefits, purchased for pennies on the dollar, can be used to pay the taxes.

Estate Planning
Reducing Taxes
Universal Life insurance