Whether a successor is a family member, partner/shareholder, or key employee
proper planning is vital to the continued success of your business now and in the future.
Early planning avoids the added strain caused by re-financing to buy out a retiring
owner/shareholder. Universal and Whole Life plans are ideal financial tools for this
application due to there ability to shelter funds on a tax-deferred basis.
Corporate Pension Augmentation - The advantage of tax-sheltered growth within a Universal
or Whole Life plan allows corporations to structure pension augmentation for executives.
By over funding the insurance requirements the cash value will accrue tax-deferred until
retirement, at which time withdrawals can be made or leveraging can be implemented.
Leveraging Strategies - Cash Values from a Universal or Whole Life plan can be assigned to
a bank, which in turn provides a line of credit to use for retirement income.
The advantages to these arrangements are that cash values within the plans continue to
accrue without taxation. As well, individuals can access their line of credit without
having to pay personal income tax. In corporate arrangements the income is taxable to the
retired shareholder. However in both cases, if structured properly the interest paid on
the line of credit may be tax deductible. Professional Assistance should always be sought
prior to implementing any of these arrangements.
In succession planning the question of Fair vs. Equal comes up in a large
number of situations. If an owner/shareholder leaves a business asset or a company to
one child; what is a fair treatment for a non-participating children? Death benefits
from a life insurance plan can be used to provide a fair equalization solution. The
amounts can be selected by the owner/shareholder, which would alleviate the added pressure,
complications and financial burden to his or her successor.
LifeCanada.Com is intended as an information and resource site for Canadians.
Professional Assistance from qualified advisors is strongly recommended prior to
implementation of any plan or concept contained within the site.