Corporate-Owned Life Insurance & the Capital Dividend Account (“CDA”)

Canadian Controlled Private Corporations (“CCPC’s) are taxed on active business income earned at the corporate level first before income is paid out either as a dividend or salary or bonus to the individual owner manager. Any investment income on surplus cash that sits in the corporation and invested and paid out as taxable dividends will accumulate a total combined tax rate of close to 57% by 2019. Recent Federal budgets have removed any advantage of investing surplus cash not used in operations to flow through a corporation versus earning the income personally to achieve tax integration.

However, successful small business corporations have a lot of value which continues to build over time and this creates a growing capital gains tax problem on the family owner’s shares of the private company. This creates a legitimate need for life insurance to fund this future tax liability triggered on the death of the owner and key shareholder. It is generally accepted by professional tax advisors that tax exempt life insurance is the most economical and efficient vehicle to fund this growing tax liability.
The benefit of corporate owned life insurance is that it captures surplus cash at the corporate level and transfers this into a tax exempt life insurance policy on the owner (owners) and key shareholder to fund this growing tax liability on the death of the owner. The death benefit proceeds are credited in excess of the adjusted cost basis (“ACB”) to the capital dividend account (“CDA”) and can be paid out tax free at death to the family shareholders.
We are independent life insurance advisors that can access the quoting system from all the major carriers to design and implement an insurance funding strategy that suits your particular needs.
WE ARE TOTALLY INDEPENDENT AND LICENSED WITH ALL THE MAJOR CARRIERS AND HAVE THE ABILITY TO ACCESS THE ENTIRE LIFE INSURANCE MARKETPLACE ON YOUR BEHALF AND DO NOT ATTEMPT TO SELL PRODUCTS THAT YOU DON’T NEED OR WANT WITHOUT UNCOVERING NEEDS.

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