Growing your estate without undue market risk and taxes
Often we see older investors shift gears near retirement and beyond. Many become risk-averse and move their assets into fixed income type investments. Unfortunately, this often results in the assets being exposed to higher rates of income tax and lower rates of return – never a good combination.
Or maybe the older investor cannot fully enjoy their retirement years for fear of spending their children’s inheritance.
The Estate Bond financial planning strategy presents a solution to both of these problems.
How does it work?
- Surplus funds are moved out of the income tax stream and into a tax-exempt life insurance policy.
- Each year a specified amount is transferred from tax exposed savings to the life insurance policy.
Many investors over the age of 60 find themselves in a quandary regarding investments that they intend to leave to their heirs. The primary concern involves the desire to conserve the investments they are bequeathing while at the same time earning a reasonable rate of return. As we all know, the volatility of the equity markets can be cruel and this can be most detrimental when investments do not have time to recover after a downturn. As a result, many mature investors choose to accept low rates of return in order to avoid loss in the funds they wish to leave to family members.
If you share these concerns, then Segregated Funds (also known as Guaranteed Investment Funds) may be the solution. Segregated Funds are similar in performance and cost to Mutual Funds but come with some very attractive advantages. Since Segregated Funds are offered by life insurance companies, they contain guarantees both at maturity and at death. Read more
Let’s face it, raising a family today can be financially challenging. The cost of living continues to increase, housing costs are rising along with education and extra-curricular activities for our children. It is tough to make ends meet and still have something left over at the end of each month.
Most families today require both parents to work to afford the lifestyle they enjoy. Losing one of those incomes through premature death, illness or a disability is a real risk that many families would have a difficult time facing emotionally and financially.
How do you protect your family?
- Life insurance is designed to protect your family by providing the resource to replace income, pay off debt, and fund future education costs in the event that one of the parents dies.
- Disability, or income replacement insurance, is designed to replace lost income if an individual is not able to work due to accident or sickness.
- Critical Illness insurance will pay a lump sum benefit in the event of a diagnosis of many major illnesses.
Most business owners understand that assets vital to the success of the enterprise should be insured. Premises are routinely covered for fire and/or theft; vehicles used to make deliveries, insured; machinery needed for manufacturing, also insured. Given that these tangible assets are instrumental in the success of the business, it makes good business sense that the business is protected in the event of a loss. But what about key employees? Many business owners overlook the impact on their business should a key employee die unexpectedly.
If you own or manage a company whose continued success is dependent on key people (it might even be you), it would be prudent to insure all key personnel whose death or incapacity would negatively affect profitability. Key persons are those who contribute to the continuing success and profitability of the enterprise.
What happens when an owner or key person dies or becomes disabled? Read more
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 significantly 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.
In making your choice, it is important to understand how renewable term policies function. In Canada, the renewal of the coverage is automatic (unless you decide not to renew) and guaranteed. The premium on renewal, however, will increase dramatically. Anyone who has 10-year renewable term insurance, instead of renewing it, should re-write the policy for a new term period. Read more
As a young family, you will be facing a lot of new challenges that you may or may not be prepared for along the way. Whether it’s children, a mortgage, or unexpected expenses that come up, now is the perfect time to start thinking about all the potential pitfalls that may arise.
In this article we want to share some of the ways that insurance can help you stay ahead of these issues, as well as how to prepare yourself for some of life’s obstacles that you and your family may face.
What Issues Should Concern you the Most?
Now that you’re starting a family, your life is just one piece of the puzzle. Your spouse and any children are also top priorities, meaning that you should consider what could happen to everyone in a variety of scenarios. Here are some crucial questions you and your partner should discuss:
What happens if one of us dies? – While this question may seem a bit morbid, it’s a necessary possibility to plan for, particularly if you are a one-income household. Even with two breadwinners, chances are that your bills and financial responsibilities are too much for one person, meaning that you need to supplement any lost income as a result of one of you passing away. Read more