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How To Maximizing Your Estate

The Estate Bond is a financial planning strategy designed to increase the size of anyone’s estate by moving surplus funds exposed to tax into a tax-deferred life insurance policy.

Why does it work?

  • Provide life insurance protection that increases the size of a client’s estate today, and in the future.
  • Opportunity to create cash value that grows on a tax-deferred basis, that may increase the insurance benefits payable at death
  • Reduces the amount of tax-payable while living
  • May help reduce estate settlement costs
  • May offer protection from creditors

How does it work?

When purchases an exempt life insurance policy in your life and designates an individual or a charitable organization as the beneficiary of the life insurance policy. At the time of the client’s death, the life insurance proceeds are paid to the client’s beneficiary, tax-free.

Who is it for?

  • Individual, Canadian-resident taxpayer
  • In good health
  • Age 45 years and older
  • Strong desire to leave a legacy at death
  • Affluent, with surplus funds available to invest
  • Receptive to long-term planning strategies

An example

In this example, the client is a 60-year-old female, non-smoker. She wants to leave a legacy for her children when she dies. She plans to invest $30,000 for the next 10 years in a life insurance policy. Her personal tax rate is 45%.

By starting with a $750,000 initial death benefit, and assuming a minimum guaranteed rate of return of 1.50%, here’s how the Estate Bond strategy can increase the size of the gift she’ll leave her children.

Personal Information Female, age 60, non-smoker
InnoVision rate of return 1.50%
Initial death benefit $750,000
Deposits $30,000 per year for 10 years
Personal tax rate 45%
Before tax investment rate for alternative investments 4%
After tax investment rate for alternative investment 2.20%
Estate Bond
Alternative Investment
Accumulated value ($) Before tax redemption value ($) Net estate value ($) Year Annual interest ($) Tax payable ($) Net Estate value ($)
25,053 0 750,000 1 1,200 540 30,660
127,339 90,874 750,000 5 6,270 2,821 160,195
263,536 263,536 750,000 10 13,260 5,967 338,805
243,132 243,132 750,000 15 14,785 6,653 377,749
182,360 182,360 750,000 20 16,484 7,418 421,171
22,258 22,258 750,000 25 18,379 8,271 469,583
25,532 25,532 750,000 30 20,492 9,221 523,561

Estate Bond can increase the amount of cash that will go to client’s heirs by over $225,000 in year 30

Estate Bond

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