You own a private corporation that generates surplus income or has significant assets in taxable investments. You don’t plan to use these investments for any specific purpose during your lifetime. Instead, you want to grow and protect this wealth to maximize what you can transfer to future generations.
The Corporate Investment Strategy uses life insurance to provide a combination of tax-preferred growth, tax-free death benefit and resulting credit to the corporation’s capital dividend account (CDA) that can help protect and significantly increase the value of your legacy.
Your corporation buys a permanent life insurance policy on your life to protect the value of the corporation for future generations. Your corporation owns the policy, pays the premiums and is also the beneficiary. The premiums are paid from the corporation’s cash flow, or by transferring funds from investments the corporation owns.
In addition to protection, the policy also offers a number of benefits.
Consider this strategy if you:
Are the shareholder of a Canadian controlled private corporation (CCPC)
Have a successful business with stable cash flow and a sound future outlook
Have a significant corporate investment portfolio or excess cash flow not needed to fund business operations
Are interested in reducing tax on corporate investment income
Want to maximize the value of your business at death
There are additional considerations and risks associated with the Corporate Investment Strategy beyond those discussed here. Policy loans and withdrawals may have tax implications. Before implementing any strategy, consult with your tax and legal advisors.