By: Kevin-Barry Henry, #1 Bestselling Author
Consider the case of a person with a RRIF that is valued at $500,000. That person will want to know that the government tax bill on that RRIF is likely to be over $200,000.
Most of my return readers (thank you) may have already read a few articles warning about the dangers of a poorly planned or neglected estate plan. The truth is that in Canada it is quite common to go the Prince (from Purple Rain) or the Aretha Franklin route and ignore your estate planning responsibilities, reasoning that “there is enough there and they are smart enough to divide it themselves”.
You need only read the numerous articles online and elsewhere about Prince’s family and Aretha Franklin’s children and family being haunted by their decisions not to plan their estates. As you can imagine, there have been a few bruising exchanges between family members and much of it in public before a judge. Don’t do that to your own family.
Protect your Assets
Of course, you may have accumulated an impressive list of assets in your time here on earth, and well-done for doing so. But are you prepared to have the Government be the principal beneficiary of your estate, standing at the head of the line in front of your own children or chosen beneficiaries?
Does it matter to you that your beneficiaries, perhaps your children and your grandchildren get everything that you have? Because without planning, the government is likely going to get a large portion of what you have, and they will get it before your children or grandchildren.
A tax-free permanent insurance policy can make sure your financial legacy extends all the way to your grandchildren.
If you already have an idea of how you plan to pass on your estate to the next two generations, you will probably want to make sure that your estate is protected.
Consider the case of a person with a RRIF that is valued at $500,000. That person will want to know that the government tax bill on that RRIF is likely to be over $200,000.
The Government gets over $200,000 and the family splits the balance between them.
Will that person’s children and grandchildren be happy that they are going to lose almost half because no plan was put in place to cover the tax liability?
It is so easy (and cheap) to consider it now.
When to consider permanent life insurance for estate planning
Not every estate plan requires life insurance. A good rule of thumb when considering permanent insurance for your estate plan is when your terminal tax bill is expected to be 15% or more of your assets.
Extend your financial legacy by Insuring your own children
You may want to consider permanent life insurance. One option to extend your financial legacy is by taking out an insurance policy on your adult children. The investment growth in these plans is not subject to annual taxation, increasing your overall wealth.
As the owner of the plan, you control the money growing inside and can access it during your lifetime if needed.
Your Child
When you purchase the plan and insure your child, they have a valuable asset right away: Life Insurance Protection. You can transfer the policy to them at any time tax free, however most people will transfer the policy at the time of their passing.
This is done seamlessly by naming them as a contingent owner on the plan. As the new owner, they now have access to all the money that is growing inside the policy. The money can be used to help buy a home, supplement their retirement or help fund their child’s education.
Your Grandchild
By naming them as the beneficiary on the policy, you have helped put a foundation in place they can build on. As the named beneficiary on the policy at the time of your adult child’s death (hopefully well into the future) your grandchild will receive the benefit proceeds tax free.
This is a great way to help extend your financial legacy. You worked hard to earn it, make your loved ones are the beneficiaries.
And you will keep them away from the judge and the taxman.
If you would like to talk about protecting your estate from the government, feel free to reach out to me for chat here: FREE CHAT WITH KBH.
As always, I look forward to hearing from you.
With Gratitude,
KBH.
THIS ARTICLE IS PROVIDED AS A GENERAL SOURCE OF INFORMATION ONLY AND SHOULD NOT BE CONSIDERED TO BE PERSONAL INVESTMENT OR LEGAL ADVICE. READERS SHOULD CONSULT WITH THEIR FINANCIAL OR LEGAL ADVISOR TO ENSURE IT IS SUITABLE FOR THEIR CIRCUMSTANCES.