Financial Tips: 6 Wealth Conservation Strategies*

Senior Couple happy over their retirement strategy

Provided are six wealth conservation strategies, each tailored to a unique set of life circumstances. Plan your financial future using one of the following financial strategies:

  • INSURED RETIREMENT STRATEGY
  • INCOME REPLACEMENT STRATEGY
  • FAMILY WEALTH STRATEGY
  • ESTATE PRESERVATION
  • PERSONAL ESTATE TRANSFER STRATEGY
  • CHARITABLE GIVING STRATEGY
StrategyYour NeedYour SituationThe Solution
Insured Retirement StrategyI want to minimize the tax on my savings and investments today, and maximize my retirement income tomorrow.
  • RRSP fully utilized, annually
  • In good health
  • In highest marginal tax bracket
  • Underlying need for insurance
  • Age 30 to 55
  • Accumulate tax-deferred savings in a universal life insurance policy. At retirement, the policy is used as collateral for a series of loans from a bank or other financial institution.
  • The loans are paid back using the death benefit, and any remaining balance is passed on to beneficiaries, tax free.
  • The loans are paid back using the death benefit, and any remaining balance is passed on to beneficiaries, tax free.
  • The accumulation account of theUNIVERSAL LIFE INSURANCE POLICYcan grow in tandem with interest payment on the loan allowing the policy owner to capitalize interest.
StrategyYour NeedYour SituationThe Solution
Income Replacement StrategyI want to ensure that my surviving family members can maintain their lifestyle if I were to die unexpectedly.
  • Dependent children, spouse or other family members
  • A significant mortgage balance or other debt
  • Major future expenses, such as education
  • Age 25 to 55
  • Determine insurance amount required using the single needs analysis plan
  • The death benefit of the policy is passed on to the beneficiary(s) free of probate and other estate costs like legal, accounting, and trustee fees.
  • Universal life allows tax-advantaged pre-funding of COI
StrategyYour NeedYour SituationThe Solution
Family Wealth StrategyI want to pass my estate on to my heirs without losing significant value to probate, taxes, and other estate charges while also reducing income taxes during my lifetime.
  • Older individuals who may be in poor health resulting in very high insurance premiums
  • Heirs are young and healthy
  • May want to pass their assets on to heirs while they are still living but maintain control
  • Large amount of assets earmarked for heirs
  • Age 50 and up
  • Designate your adult child or grandchild as successor owner of the contract where a CHILD OR GRANDCHILD IS THE LIFE INSURED
  • Invest the maximum amount of money into the policy to generate a high cash surrender value
  • Upon the policy owner’s death, the child or grandchild can take ownership of the policy on a rollover basis without probate or taxable disposition
  • Alternatively, at an earlier time the policy owner may transfer to a child on a tax-deferred basis
  • Optimize the sum insured
  • When the child or grandchild becomes the owner, funds may be withdrawn and will generally be taxed at a child or grandchild’s lower rate
StrategyYour NeedYour SituationThe Solution
Estate PreservationI want to protect the proceeds of my estate (ie. disposed non-registered investments, real estate, shares of a corporation RRSPs and RRIF balances, etc) from taxation when they can’t be rolled over to a spouse or dependent.
  • Sizable personally owned assets (stocks, funds, real estate, business assets, etc.)
  • Large RRSP/RRIF
  • Assets that will trigger taxes may hold sentimental value to heirs so you want to ensure they do not have to be liquidated to pay taxes (eg. cottage)
  • Age 50 and up
  • Project the total expenses at life expectancy against the estate using the Estate Preservation Strategy Client Worksheet
  • Let IDC help youFIND THE RIGHT INSURANCE POLICYto determine the face amount and premium to cover the estate tax liability at any point in time and select the most cost effective company to supply this insurance.
StrategyYour NeedYour SituationThe Solution
Personal Estate Transfer StrategyI want to bequest investment assets to my heirs while avoiding probate and other estate costs, potentially protecting the investment from creditors and deferring or eliminating current taxation of the investment.
  • Generating income in excess of living expenses
  • Non-registered funds set aside for specific bequest
  • Unlikely to ever need capital for living expenses
  • Want to maximize estate orWILLbenefits
  • Paying to much current income tax
  • Desire to maintain control of assets while alive
  • Age 50+
  • Transfer liquidated non-registered assets into exempt life insurance policy
  • Immediate estate enhancement via insurance
  • Reduction of current tax burden
  • Tax-free death benefit paid directly to named beneficiary
  • Funds are accessible and under client’s control
StrategyYour NeedYour SituationThe Solution
Charitable Giving StrategyI want to protect the value of my estate and also leave a generous gift to my favoured charity.
  • Wants to leave a gift to favoured charity(s)
  • Sizable personally-owned assets (stocks, funds, real estate, business assets, etc.)
  • Assets that will trigger taxes may hold sentimental value to heirs so you want to ensure they do not have to be liquidated to pay taxes (eg. cottage)
  • Age 50 and up
  • Project the total expenses against estate using the Estate Preservation Strategy Client Worksheet. Read our post onUNDERSTANDING WHOLE & UNIVERSAL LIFE INSURANCE to see how they policies are differ,
  • Project the tax credit from the planned death benefit to charity to offset the projected income tax on the registered investments and capital gains at life expectancy. The remaining death benefit of the policy is designated to the estate to pay for probate fees, executor fees, taxes, and debts.

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