Maximize Captial Dividend Account Case Study

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Maximize Captial Dividend Account Case Study

Mary (early’ 60s) is very successful – she is looking to invest $12.5 million of corporate funds into a tax-sheltered life insurance policy for estate and tax purposes

Mary is a very successful entrepreneur and has created significant wealth within her corporation. She understood that there would be multiple layers of income tax for her estate and the subsequent payment of funds to her heirs on her passing. As an Ontario resident, the personal taxes on the distribution to her heirs would be between 40-44%.

Her professional advisors had recommended that she make five equal premium payments of $2.5 million into a Canadian life insurance policy within her corporation. This would guarantee her corporation $30 million of death benefit and a credit of $30 million to the capital dividend account, allowing $30 million to be distributed from her corporation to her heirs on a tax-free basis. At 40%, this would create potential tax savings to her heirs of $12-$14 million.

Succession America in researching the U.S. markets, determined that for five equal premiums payments of $2.5 million U.S., she could secure $33 million U.S. of guaranteed death benefit and conservatively payout $48 million. An increase of 60%.

The policy was successfully underwritten and placed.

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