Wealth Building Checklist to reduce your business and personal taxes

Using life insurance to diversify your assets and prepare for retirement:

Now that you’ve got this life insurance coverage, what can you do with it? Converting a term policy (or a portion of the policy) to permanent coverage can give you a vehicle to set up an Insurance Retirement Plan. This gives you a tax-effective way to get money out of your business. Once again, this isn’t something that you can see a windfall with overnight but instead over the course of 10-20 years. Also, the younger you are when you convert your insurance, the net cost of pure insurance is significantly less therefore you have a greater ability to contribute to either more insurance or greater accumulating cash.

You’ve inquired about Critical Illness insurance through your business and notice that it’s a considerable amount more than term life insurance. If you get sick, the CI policy will pay a one time benefit into the business but what happens if you stay healthy? That’s great but you’re walking away from a considerable amount of lost premium. A tax and wealth accumulation strategy is to participate in a Split Dollar Critical Illness contract. The corporation pays the critical illness premium and the business owner personally pays the Return of Premium portion. If the business owner stays healthy then there’s an opportunity to get the premium back in a tax-preferred manner. If the business owner does get sick, the policy pays into the business. It’s what some call a double lottery, either way it pays out, whether you get all your premiums back or its pays into your business should you get sick.

Another opportunity is to create a company-funded and sponsored Personal Pension Plan (PPP). It has flexibility for contributions in very profitable or in lean years. It’s like a Supercharged RRSP that has considerable amount of potential for contribution after the age of 40. The returns are guaranteed by your company. The taxable benefits for your business and your retirement are considerable. Contributions, administrative and management fees are an expense to the business. Because it is a registered pension, it is completely creditor protected.