Whole Life In­sur­ance as an Al­ter­na­tive In­vest­ment

Midtown Post - - Ask The Expert -

If only we had a crys­tal ball. We would know the best time to put money in the stock mar­ket, when in­ter­est rates will rise, when death or in­jury would oc­cur; or on a lighter note, pick next week’s win­ning lot­tery num­bers. Un­for­tu­nately, there isn’t such a thing as a crys­tal ball. How­ever there is the abil­ity to help peo­ple look at their fi­nances dif­fer­ently and per­haps look at al­ter­na­tive in­vest­ment op­tions based on our cur­rent eco­nomic en­vi­ron­ment.

Re­cently there has been an op­por­tu­nity to make use of life in­sur­ance as an al­ter­na­tive as­set class. This is an ex­cel­lent strat­egy for busi­ness own­ers who ac­cu­mu­late re­tained earn­ings within their cor­po­ra­tions. This type of plan­ning is par­tic­u­larly at­trac­tive to in­di­vid­u­als, who would be char­ac­ter­ized as hav­ing a low risk tol­er­ance and don’t want to risk their cap­i­tal; who are in­ter­ested in in­creas­ing the value of their es­tate that would pass on to their chil­dren. The mean­ing­ful ben­e­fits of whole life in­sur­ance are:

• The abil­ity to in­crease your rate of re­turn sig­nif­i­cantly on cash, near cash and a por­tion of your fixed in­come port­fo­lio over a long pe­riod of time;

• The abil­ity to ac­cess your eq­uity in a tax ef­fec­tive man­ner if the in­vested cap­i­tal is re­quired for other in­vest­ment op­por­tu­ni­ties to pro­vide you with a fu­ture in­come;

• Sig­nif­i­cant down­side pro­tec­tion in the event of death with im­me­di­ate liq­uid­ity that can be used to fi­nance es­tate tax li­a­bil­i­ties, pro­vide funds for char­i­ta­ble en­deav­ours or equal­ize es­tate as­sets for your chil­dren and grand­chil­dren;

• The abil­ity to cre­ate a sig­nif­i­cant cap­i­tal div­i­dend ac­count, which would en­able your heirs to ac­cess cor­po­rate cap­i­tal in a tax-free man­ner in the fu­ture.

In con­clu­sion, the strat­egy of us­ing whole life in­sur­ance as an al­ter­na­tive in­vest­ment in­volves repo­si­tion­ing a por­tion of cor­po­rate dol­lars into a per­ma­nent life in­sur­ance con­tract. Struc­tured cor­rectly the strat­egy min­i­mizes the cap­i­tal gains trig­gered upon death and takes ad­van­tage of the Cap­i­tal Div­i­dend Ac­count to pay a tax-free div­i­dend to the share­hold­ers/ben­e­fi­cia­ries. Funds con­trib­uted to the strat­egy grow free from tax and are accessible dur­ing one’s life­time.

Jaymie Bon­gard

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