The Business Of Farming
Being a part of the rural community, we know farming and the unique aspects of it when it comes to wealth, health and estate planning
Intergenerational Wealth Transfers (Cascade)
Some clients benefit from a desirable situation and wish to provide a solid financial future for their children or grandchildren. Our intergenerational wealth transfer strategy provides them with a way to do this tax-efficiently:
● A parent or grandparent purchases participating life insurance (such as an iA PAR) or any other permanent life insurance product that has a surrender value for their children or grandchildren.
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● To free the policy from payment, the subscriber will pay the premiums in 10 or 20 years. The subscriber may also make excess premium contributions, creating a tax-free surrender value over the years.
● When the child or grandchild reaches adulthood, the parent or one of the grandparents can assign ownership of the full paid-up life insurance policy to that person. Under subsection 148(8) of the Income Tax Act (ITA), this transfer will have no tax consequences.
● The child or grandchild may also benefit from the surrender value accumulated in the life insurance policy to undertake certain expenses or benefits from later growth.
Estate Planning
Estate planning is a financial strategy we use to improve estate inheritance while also offering the possible benefits of permanent life insurance.
To carry out this strategy, the permanent life insurance policy payments are maximized for the insured person's life. Instead of purchasing unregistered fixed-income securities, the policyholder prefers payments to the insurance policy. The returns generated on the payments made to the policy and the surrender value accumulate tax-free for the duration of the insured person's life.
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At the time of the insured person's death, the death benefit, improved by the surplus contributions to the permanent life insurance policy, is paid out to the named beneficiaries tax-free.
Shared Ownership Critical Illness Insurance
The main objective of shared ownership critical illness insurance is to allow the shareholder of a private company to benefit from insurance coverage in the event of a critical illness that is covered by the policy. However, when a company and its shareholder take out a critical illness policy on said shareholder, this strategy can also offer other advantages:
● The insurance policy provides for the payment of benefits to the company in the event the shareholder suffers from one of the medical conditions or illnesses covered.
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● The contract is taken out with a premium repayment option if the critical illness benefit has not been paid upon termination or the expiration of the policy (for example, after 15 years).
● This option is payable by the shareholder personally through a higher salary or dividend or by the company, thus becoming a taxable benefit. However, after a certain number of years, it provides for repayment of all premiums, particularly those of the company and the shareholder, all tax-free and net of management fees. The amount is paid to the shareholder, tax-free.
● In addition to allowing the money to be released by the company, this option allows an interesting off-balance sheet return in several circumstances, especially if the shareholder’s marginal rate is high. This could also reduce the amounts of liabilities and the risk of losing the perferable corporate rate.
Immediate Financing Arrangements
The immediate financing arrangement (IFA) is a financial strategy we use to allow our clients to benefit from permanent life insurance coverage while allowing those who adhere to it to retain access to the required liquidity to sustain the growth of their company.
An invested party holds a life insurance policy that will generate high surrender values. The policyholder then pays the insurance premiums and makes additional deposits to help the surrender value grow as quickly as possible based on the financial limits determined by the Income Tax Act (ITA). The surrender value of this life insurance policy will then accumulate tax-free.
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Once the life insurance policy's surrender value grows, it is used as security to acquire financing from an external financial organization. The liquidity generated by the loan is then reinvested in the course of the business's activities. When the conditions are respected, a portion of the premiums paid and the interest on the loans are deductible for tax purposes. New loans are issued each year to optimize this strategy.
In the event the insured dies, the death benefit is then paid out tax-free. A portion of this benefit is used to repay the loan to the financial organization, and the remaining balance is paid to the named beneficiaries.
To learn more:
Immediate financing arrangement – Implementation Guide (PDF)file_download
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At Paslawski Capital Management, we believe the power of knowledge, skill and experience is what makes a successful business. That's why we've partnered with PPI. PPI's highly credentialed team of accountants, lawyers and actuaries can collaborate with our client's advisors in a research and support role. They offer advanced tax and estate planning, in-depth knowledge and experience, and customized solutions for complex client needs that demand sophisticated planning and strategies.