Video: Life Insurance and Estate Planning

When you pass away, you are deemed to have disposed of all your assets at the fair market value. If you have a spouse, these assets can usually be transferred to him or her with no tax implications, meaning that any taxes will be deferred until your spouse’s death. 

Otherwise, the Executor, or Estate Trustee, must immediately pay any taxes due. This is why various estate planning methods are used to minimize the taxes owing, protect the estate and simplify the transfer of wealth. 

Among these methods, life insurance is often preferred because it can achieve a number of different objectives. 

To begin with, it can provide the funds needed to cover the taxes and other financial obligations associated with a death. 

It can also be used to make a major donation to a registered charity, allowing the organization to receive significant capital.

And in a corporate business context, life insurance can be used to redeem shares under the shareholders’ agreement or provide a source of cash to ensure the continuity of operations. If the company is the beneficiary, the company will receive the benefits, but some or all may be transferred to the shareholders, tax free, through the capital dividend account. 

As we can see, life insurance can be used for estate planning strategies that are simple… or more complex, depending on a person’s needs.

To find out more, contact your financial security advisor or your mutual fund representative.

Screen with logos