You take pride in the stability of your finances. Your attention to detail and adherence to steady routines have carried you into a comfortable retirement without fear of any money troubles ahead.
In fact, it’s becoming ever clearer that – even with a prudently established buffer for the unexpected –
there’s no doubt you’ll be leaving something behind.
So, knowing that you’ll have an estate to share with those you care for, you can now focus your effort on boosting how much you can pass on.
One way to do that is to allocate surplus cash into
non-registered investments, to eventually pass through your estate to your heirs. Unfortunately, tax is due on such investment income as it is earned each year, which can significantly stifle growth.
And your untaxed growth in the form of unrealized capital gains is only temporarily shielded, as tax also applies on the deemed disposition when you die.
To add insult, in some provinces a probate fee/tax is levied on investments flowing through your estate before making it into your beneficiaries’ hands.
Rather than exposing your surplus cash to that kind of wealth erosion, look at the difference if you house it inside a tax-exempt life insurance policy.
Whether it’s an existing policy or a new policy acquired specifically for this purpose, there are three ways it can help you achieve that boost:
- A policyholder can prepay future premiums that can be invested tax-sheltered within the policy
- Both the policy face amount and the cash value (i.e., the tax-sheltered growth) pay out tax-free
- Payment to beneficiaries bypasses the estate
First, engage your advisor to help you inventory your income sources and estimate your future expenses to arrive at a manageable annual surplus cash target to apply to the plan.
Next, have your advisor review existing insurance to determine its capacity (because it’s not unlimited) to house surplus cash. If more room is needed, apply for new insurance as desired.
Finally, make the regular premium payments and surplus cash deposits, and be sure to complete the beneficiary designation to pull it all together.
