Estate Planning

As per a famous quotation: “The only two certainties in life are Death and Taxes “. Estate planning is all about ways to save and finance the taxes to be paid upon death to minimize erosion of a person’s estate. It is a strategy to protect the value of his legacy. Permanent Life insurance plays a key role in it.

For income tax purposes a person is considered to have sold all his assets at the time of death. The value of his assets at his death is considered the Sale Proceeds. The excess of Proceeds, over the Cost he bought them, for is considered a Capital Gain of which 50 percent is taxed per the current law.

There are only 4 things in Canada that are tax free to the estate:

• Principal residence
• Tax Free Saving Account (TFSA)
• Life insurance
• Cash

As one works hard and achieves a degree of financial independence in life, one many believe that his need for life insurance decreases. However, the largest burden on his estate can be the taxes owing on his assets. When a person passes away, his estate or the next generation might not have enough cash to take care of estate taxes which would lead to an erosion a large portion of the estate by means of Estate sale of properties, etc. just to cover the tax bill. This forced sale is usually below Fair market value since there is no option left at that time.

Life insurance is the only tool where you pay pennies to create a tax-free dollar for your beneficiary, which would help in paying Estate taxes. First essential component of any estate plan is a Will created with the help of a lawyer. Other than that, the most crucial component is calculating the estimated Estate taxes which would have to be paid upon a person’s death. These estate tax bills can be ridiculously huge.

Life insurance can be a cost-effective strategy to provide funds exactly when they are needed. A permanent life insurance policy can provide your beneficiary with the funds necessary to pay taxes owing upon your death. A tax-advantaged permanent life insurance policy allows for the accumulation of cash values inside the policy, within certain legislative limits and without paying income tax on growth. The death benefit is paid to beneficiaries tax-free upon death.

We help you to get an estimate of your estate tax bill with the help of certain tools and give you a solution accordingly.