Why/When to own Corporate Owned Permanent Insurance

When should you consider Participating Whole Life Insurance inside your Corporation?

You’re a significant shareholder in a Canadian Controlled Private Corporation
Age 40+ and healthy
The corporation has excess annual cash flow and/or investment assets not needed for business purposes. Typically, been in business for at least 5 years.
Want to maximize your estate and transfer assets in a tax-efficient manner
Looking for stable and predictable asset growth (asset diversification)

Suitability Reasons

The more checkmarks the greater the need for this strategy.

✔️ Business Succession plan in place?
✔️ Reduce tax on corporate investment income?
✔️ Desire to pass corporate assets to a beneficiary?
✔️ Have a corporate life insurance need?
✔️ Own taxable passive investment assets?
✔️ Own corporate investments with a deferred capital gain?
✔️ Want a certain amount of estate value guaranteed?

Comparing a traditional investment to participating whole life insurance while living and at death

While Living:

Taxes payable on investment income: Interest, dividends, realized capital gains
Passive investment income: Pay the highest corporate tax rate, no small business deduction

At Death:

Taxes payable on deferred capital gains
Taxes payable on the transfer to shareholders estate

Participating Whole Life Insurance
(Alternative asset class)

While Living:

Policy earnings grow tax-exempt up to government prescribed limits

At Death:

All policy proceeds are paid tax-free to the corporation (no deferred gains)
Death benefit minus adjusted cost base paid out tax-free to shareholders estate through a notional Capital Dividend Account