Permanent life insurance is considered one of the last tax-efficient ways high-net-worth Canadians can protect and pass along their wealth, but a new survey suggests more advisors should be discussing the option with clients.
With permanent life insurance, the insured pays a regular premium that grows tax-free in the policy and is then paid tax-free to their beneficiaries after they pass away. The benefit also bypasses probate, which means it’s paid out more quickly than many other assets in an estate. Depending on the, the policy can be used as collateral to secure a loan. If a person dies before paying back the loan, the unpaid amount would be reduced from the payout to beneficiaries upon death.
He views it as a potential alternative to non-registered investing. For example, a permanent life insurance policy can replace part of an investor’s fixed-income portfolio, which is taxed highly.“‘Never money’ is money they may never use in their lifetime and plan to leave to people like their children, grandchildren, or to charity,” he says.
He notes business owners can use the insurance to provide a death benefit to family members or business partners. For instance, the benefit could be paid to the surviving business partners, enabling them to buy the deceased person’s share of the business.