Corporate Legacy Builder - Home | Empire Life Corporate Legacy Builder strategy uses a portion of...

CORPORATELEGACYBUILDER

June-06-17

Proposal For Corporate Legacy Builder

Prepared By: Retail Insurance Marketing

500 - 2550 Victoria Park AveToronto , ON M2J5A9

416494297218775481881

4164942972 (fax)[email protected]

mailto:[email protected]

Prepared for Corporate Legacy BuilderC

OR

POR

AT

E LEGA

CY

BUILD

ER

June-06-17 E.&O.E. of 12

What is the Corporate Legacy Builder?

Corporate Legacy Builder is a strategy that gives business owners an opportunity to grow passive assets and/or surplus profits within an insurance policy on a tax-deferred basis. This alternative to traditional investments is designed to provide a business with funds that can be paid tax-free to shareholders or their estates when a business owner or key person dies. The business can also access cash for business needs while the owner or key person is alive.

Under current tax laws, when a business insures one of its owners or a key person and the insured person dies, the company receives the insurance proceeds tax-free and is entitled to credit its capital dividend account with an amount equal to the insurance proceeds minus the adjusted cost basis of the policy. Credits in the company’s capital dividend account can be paid out to its shareholders tax-free.

This strategy is best suited for client ages 50+ who own corporations with large retained earnings that sit in or can be moved to holding companies, investment or management companies and need liquid dollars if they or a key person dies, to fund buy sell agreements, cover collateral arrangements and bank loans and/or capital gains liabilities.

How the Corporate Legacy Builder works?

Holding Companies are often set up to protect retained earnings of the operating company from potential liabilities. Excess funds are transferred from the operating company to the holding company to maintain the small business status of the operating company and allow it to remain eligible for lower tax rates.

The Corporate Legacy Builder strategy uses a portion of retained earnings (passive assets) to fund a life insurance contract to take advantage of tax-sheltered growth inside the life insurance contract.

The strategy capitalizes on the tax-free payment of life insurance proceeds to the company on the death of the person insured and minimizes Capital Gains tax. Companies can also take advantage of the Corporate Capital Dividend Account to pay the insurance proceeds less the adjusted cost basis of the policy tax-free to its shareholders. This is in contrast to the personal tax rates that apply when regular dividends are paid to shareholders.

The information is for general information purposes only and is not to be construed as providing legal, tax, financial or professional advice. The Empire Life Insurance Company assumes no responsibility for any reliance made on or misuse or omissions of the information contained in this document. Please seek professional advice before making any decision.

® Trademark of The Empire Life Insurance Company. Policies are issued by The Empire Life Insurance Company

“ Providing funds

that can be paid tax free to shareholders using your company’s surplus profits”


OR

POR

AT

E LEGA

CY

BUILD

ER

June-06-17 E.&O.E. of 12

The Corporate Legacy Builder Strategy

The Opportunity

Business owners benefit from the ability to grow corporate assets on a tax-deferred basis within a life insurance policy during their lifetime.

They are able to access cash while they are alive for business needs such as key person, debts and buy sell agreements. The tax-free life insurance proceeds received by the company at death can be paid out to the business owner’s estate and used to fund donations to charity or leave a legacy for heirs.

The strategy provides and effective mechanism to remove funds form the holding company and can be used to optimize the business owners estate value at death by reducing capital gains exposure. This is accomplished by using corporate assets to fund life insurance.

The Fair Market Value of corporate shares immediately prior to death only reflects the cash surrender values of corporate owned life insurance immediately prior to death (as described in Subsection 70(5.3) of the Income Tax Act (Canada).

The Challenge

Operating companies, holding companies and management companies often contain retained earnings or surplus cash that are not used in active business. These assets are often retained and invested by the company because usually they can only be paid out to the individual shareholders as taxable distributions unless the company’s capital dividend account has a credit balance.

Frequently, retained earnings or surplus cash are invested in GICs or other short-term investments that may offer guarantees and easy access to cash in exchange for low rates of return. While active business income may be taxed at the small business rate, invested retained earnings and surplus cash are treated as passive income and are taxed at the top marginal tax rates.

Business owners may wish to leave something to a church, favorite charity, school, community, etc. when they die in addition to leaving something to children or grandchildren but may feel that don’t have enough money to do both.

The information in this document is for general information purposes only and is not to be construed as providing legal, tax, financial or professional advice. The Empire Life Insurance Company assumes no responsibility for any reliance made on or misuse or omissions of the information contained in this document. Please seek professional advice before making any decision.

® Trademark of The Empire Life Insurance Company. Policies are issued by The Empire Life Insurance Company


OR

POR

AT

E LEGA

CY

BUILD

ER

June-06-17 E.&O.E. of 12

CONCEPT ASSUMPTIONS

InsuredsInsured..................................................................................................Corporate Legacy Builder,

Male, Age 50, Non-Smoker

ProductName.................................................................................................... $830,009 Optimax Wealth,

Single LifePlanned Deposits (8 years)

Alternative InvestmentGrowth Breakdown.......................................................................... 100 % InterestEffective Tax Rate On Interest....................................................... 46.00 %Projected Annual Growth Rate......................................................3.000 %

Special Notes

Withdrawals from the policy may be subject to income tax, depending on the adjusted cost basis (ACB) of the policy,at the time of withdrawal. However, the proceeds of a life insurance policy upon death of the insured are received tax-free in the hands of the beneficiaries.

Important InformationThis illustration is not a contract and the values are not guaranteed.

The tax treatment of this illustration is based on the current Canadian Federal Income Tax laws and regulations. Anychanges will affect the amounts shown on the illustration.

It is advisable to contact a competent professional advisor in determining whether this Strategy is suitable to yoursituation.

If this strategy shows a corporately owned scenario with an Alternate Investment, this illustration shows the netestate value assuming that the alternative investment and the insurance are paid out as a dividend at death. It doesnot reflect any capital gain on the deemed disposition of the shares at death. This strategy uses an Empire Lifeinsurance policy.

The amounts shown in the illustration may or may not be achieved depending on assumptions used.

Corporate Owned Life Insurance only: The General anti-avoidance Rule (GAAR) in the Income Tax Act may deny atax benefit that is the result of an avoidance transaction, unless it is undertaken primarily for purposes other than toobtain the tax benefit. Since the main purpose of this strategy is to provide a business with a higher tax-free value ofthe business for the estate or surviving shareholders, the GAAR rule is unlikely to apply.

This document consists of two parts: the presentation and the Empire Life illustration. The presentation and theillustration are designed to read together, to fully understand how some of the values shown in the illustrations mayvary. If either part is missing, this document is non-compliant and incomplete.

This document is for illustrative purposes only and is not a contract or offer of insurance. Illustrated values are notguaranteed.

Empire Life and its employees, distribution partners, and independent advisors do not provide specific legal,accounting, or tax advice. The provision of information provided on this presentation and corresponding illustrationand any oral or written communication regarding the same should not be construed as such.

This illustration is incomplete without all pages.

® Registered trademark of The Empire Life Insurance Company. Policies are issued by The Empire Life InsuranceCompany.


OR

POR

AT

E LEGA

CY

BUILD

ER

June-06-17 E.&O.E. of 12

EXECUTIVE SUMMARY (1)

Policyyear

After-Tax Benefit

Insurance After-TaxLegacy Benefit

Investment After-Tax Legacy Benefit

Comparison

After-Tax BenefitInsurance vs.Investment

Insurance %Increase overInvestment

Equivalent Pre-TaxReturn (%)

10 $768,417 $336,275 $432,143 129 % 14.11 %20 $1,037,906 $394,899 $643,008 163 % 7.58 %30 $1,447,324 $463,743 $983,580 212 % 6.01 %40 $2,045,764 $544,590 $1,501,174 276 % 5.34 %50 $2,790,673 $639,531 $2,151,142 336 % 4.87 %

** Values shown beginning/ end of policy year. Tax payable is not withheld from the policy and may be higher or lower and is notguaranteed.


OR

POR

AT

E LEGA

CY

BUILD

ER

June-06-17 E.&O.E. of 12


Policyyear

After-Tax Benefit



Comparison




1 $817,680 $38,452 $779,228 2,026.47 % 1,592.20 %2 $807,232 $77,528 $729,704 941.22 % 272.29 %3 $796,791 $117,236 $679,555 579.65 % 122.44 %4 $786,358 $157,588 $628,770 399.00 % 72.18 %5 $775,935 $198,593 $577,341 290.72 % 48.02 %6 $765,520 $240,263 $525,257 218.62 % 34.10 %7 $755,116 $282,608 $472,508 167.20 % 25.17 %8 $744,720 $325,638 $419,082 128.70 % 19.01 %9 $746,853 $330,914 $415,939 125.69 % 15.95 %10 $768,417 $336,275 $432,143 128.51 % 14.11 %11 $790,756 $341,722 $449,034 131.40 % 12.72 %12 $813,937 $347,258 $466,679 134.39 % 11.63 %13 $838,032 $352,884 $485,148 137.48 % 10.76 %14 $863,119 $358,600 $504,519 140.69 % 10.05 %15 $889,281 $364,410 $524,871 144.03 % 9.46 %16 $916,623 $370,313 $546,310 147.53 % 8.96 %17 $945,211 $376,312 $568,899 151.18 % 8.54 %18 $974,913 $382,408 $592,504 154.94 % 8.18 %19 $1,005,783 $388,604 $617,179 158.82 % 7.86 %20 $1,037,906 $394,899 $643,008 162.83 % 7.58 %21 $1,071,382 $401,296 $670,085 166.98 % 7.34 %22 $1,106,273 $407,797 $698,476 171.28 % 7.12 %23 $1,142,674 $414,404 $728,270 175.74 % 6.93 %24 $1,180,679 $421,117 $759,562 180.37 % 6.75 %25 $1,220,373 $427,939 $792,434 185.17 % 6.60 %26 $1,261,846 $434,872 $826,975 190.17 % 6.46 %27 $1,305,189 $441,917 $863,272 195.35 % 6.33 %28 $1,350,489 $449,076 $901,413 200.73 % 6.21 %29 $1,397,836 $456,351 $941,485 206.31 % 6.11 %30 $1,447,324 $463,743 $983,580 212.10 % 6.01 %31 $1,499,050 $471,256 $1,027,794 218.10 % 5.93 %32 $1,553,089 $478,890 $1,074,199 224.31 % 5.85 %33 $1,609,508 $486,649 $1,122,859 230.73 % 5.77 %34 $1,668,395 $494,532 $1,173,863 237.37 % 5.70 %35 $1,729,823 $502,544 $1,227,280 244.21 % 5.64 %36 $1,793,876 $510,685 $1,283,191 251.27 % 5.58 %37 $1,858,054 $518,958 $1,339,096 258.04 % 5.52 %38 $1,918,382 $527,365 $1,391,017 263.77 % 5.45 %39 $1,980,939 $535,908 $1,445,031 269.64 % 5.39 %40 $2,045,764 $544,590 $1,501,174 275.65 % 5.34 %41 $2,112,874 $553,412 $1,559,462 281.79 % 5.28 %42 $2,182,254 $562,378 $1,619,876 288.04 % 5.23 %43 $2,253,872 $571,488 $1,682,384 294.39 % 5.18 %44 $2,327,640 $580,746 $1,746,893 300.80 % 5.13 %45 $2,403,405 $590,154 $1,813,251 307.25 % 5.09 %46 $2,480,877 $599,715 $1,881,162 313.68 % 5.04 %47 $2,559,550 $609,430 $1,950,120 319.99 % 5.00 %



OR

POR

AT

E LEGA

CY

BUILD

ER

June-06-17 E.&O.E. of 12


Policyyear

After-Tax Benefit



Comparison




48 $2,638,589 $619,303 $2,019,286 326.06 % 4.96 %49 $2,716,492 $629,336 $2,087,156 331.64 % 4.91 %50 $2,790,673 $639,531 $2,151,142 336.36 % 4.87 %



OR

POR

AT

E LEGA

CY

BUILD

ER

June-06-17 E.&O.E. of 12

LIFE INSURANCE

Policyyear

Annual Deposit/Premium

Life InsuranceProceeds Adjusted Cost Basis

Credit to CapitalDividend Account

After-tax LegacyBenefit

1 $50,000 830,009 49,315 780,694 817,6802 $50,000 831,828 98,383 733,445 807,2323 $50,000 833,611 147,282 686,329 796,7914 $50,000 835,364 196,024 639,340 786,3585 $50,000 837,089 244,617 592,472 775,9356 $50,000 838,789 293,076 545,713 765,5207 $50,000 840,468 341,407 499,061 755,1168 $50,000 842,127 389,629 452,498 744,7209 $0 843,772 387,677 456,095 746,85310 $0 864,768 385,405 479,363 768,41711 $0 886,447 382,766 503,681 790,75612 $0 908,863 379,704 529,159 813,93713 $0 932,072 376,161 555,911 838,03214 $0 956,136 372,068 584,068 863,11915 $0 981,116 367,343 613,774 889,28116 $0 1,007,098 361,899 645,199 916,62317 $0 1,034,173 355,850 678,324 945,21118 $0 1,062,195 349,130 713,065 974,91319 $0 1,091,202 341,676 749,526 1,005,78320 $0 1,121,259 333,412 787,848 1,037,90621 $0 1,152,446 324,259 828,187 1,071,38222 $0 1,184,809 314,143 870,666 1,106,27323 $0 1,218,418 302,976 915,442 1,142,67424 $0 1,253,348 290,676 962,672 1,180,67925 $0 1,289,662 277,158 1,012,505 1,220,37326 $0 1,327,430 262,335 1,065,095 1,261,84627 $0 1,366,718 246,118 1,120,600 1,305,18928 $0 1,407,595 228,424 1,179,171 1,350,48929 $0 1,450,128 209,166 1,240,962 1,397,83630 $0 1,494,390 188,264 1,306,126 1,447,32431 $0 1,540,459 165,636 1,374,823 1,499,05032 $0 1,588,392 141,209 1,447,183 1,553,08933 $0 1,638,236 114,911 1,523,324 1,609,50834 $0 1,690,065 86,680 1,603,386 1,668,39535 $0 1,743,938 56,457 1,687,480 1,729,82336 $0 1,799,923 24,191 1,775,733 1,793,87637 $0 1,858,054 0 1,858,054 1,858,05438 $0 1,918,382 0 1,918,382 1,918,38239 $0 1,980,939 0 1,980,939 1,980,93940 $0 2,045,764 0 2,045,764 2,045,76441 $0 2,112,874 0 2,112,874 2,112,87442 $0 2,182,254 0 2,182,254 2,182,25443 $0 2,253,872 0 2,253,872 2,253,87244 $0 2,327,640 0 2,327,640 2,327,64045 $0 2,403,405 0 2,403,405 2,403,40546 $0 2,480,877 0 2,480,877 2,480,87747 $0 2,559,550 0 2,559,550 2,559,55048 $0 2,638,589 0 2,638,589 2,638,58949 $0 2,716,492 0 2,716,492 2,716,492



OR

POR

AT

E LEGA

CY

BUILD

ER

June-06-17 E.&O.E. of 12

LIFE INSURANCE

Policyyear

Annual Deposit/Premium

Life InsuranceProceeds Adjusted Cost Basis

Credit to CapitalDividend Account

After-tax LegacyBenefit

50 $0 2,790,673 0 2,790,673 2,790,673



OR

POR

AT

E LEGA

CY

BUILD

ER

June-06-17 E.&O.E. of 12

ALTERNATE INVESTMENT

Policyyear

AnnualDeposit/Premium

3.00 %AnnualGrowth

Tax DueOn

Growth46.00 %

Tax onunrealized

capitalgains

TotalValue

After Tax

Cumulative RDTOH{RDTOH

Rate}Total

Dividend

TaxPayable

OnDividend25.00 %

After-taxLegacyBenefit

1 $50,000 $1,500 $690 0 50,810 460 51,270 12,817 38,4522 $50,000 $3,024 $1,391 0 102,443 927 103,370 25,843 77,5283 $50,000 $4,573 $2,104 0 154,913 1,402 156,315 39,079 117,2364 $50,000 $6,147 $2,828 0 208,232 1,885 210,117 52,529 157,5885 $50,000 $7,747 $3,564 0 262,415 2,376 264,791 66,198 198,5936 $50,000 $9,372 $4,311 0 317,476 2,874 320,351 80,088 240,2637 $50,000 $11,024 $5,071 0 373,429 3,381 376,810 94,203 282,6088 $50,000 $12,703 $5,843 0 430,289 3,896 434,185 108,546 325,6389 $0 $12,909 $5,938 0 437,260 3,959 441,218 110,305 330,91410 $0 $13,118 $6,034 0 444,343 4,023 448,366 112,092 336,27511 $0 $13,330 $6,132 0 451,542 4,088 455,630 113,907 341,72212 $0 $13,546 $6,231 0 458,857 4,154 463,011 115,753 347,25813 $0 $13,766 $6,332 0 466,290 4,222 470,512 117,628 352,88414 $0 $13,989 $6,435 0 473,844 4,290 478,134 119,533 358,60015 $0 $14,215 $6,539 0 481,520 4,359 485,880 121,470 364,41016 $0 $14,446 $6,645 0 489,321 4,430 493,751 123,438 370,31317 $0 $14,680 $6,753 0 497,248 4,502 501,750 125,437 376,31218 $0 $14,917 $6,862 0 505,303 4,575 509,878 127,469 382,40819 $0 $15,159 $6,973 0 513,489 4,649 518,138 129,535 388,60420 $0 $15,405 $7,086 0 521,808 4,724 526,532 131,633 394,89921 $0 $15,654 $7,201 0 530,261 4,801 535,062 133,765 401,29622 $0 $15,908 $7,318 0 538,851 4,878 543,730 135,932 407,79723 $0 $16,166 $7,436 0 547,581 4,957 552,538 138,135 414,40424 $0 $16,427 $7,557 0 556,451 5,038 561,489 140,372 421,11725 $0 $16,694 $7,679 0 565,466 5,119 570,585 142,646 427,93926 $0 $16,964 $7,803 0 574,626 5,202 579,829 144,957 434,87227 $0 $17,239 $7,930 0 583,935 5,287 589,222 147,306 441,91728 $0 $17,518 $8,058 0 593,395 5,372 598,767 149,692 449,07629 $0 $17,802 $8,189 0 603,008 5,459 608,467 152,117 456,35130 $0 $18,090 $8,322 0 612,777 5,548 618,325 154,581 463,74331 $0 $18,383 $8,456 0 622,704 5,638 628,342 157,085 471,25632 $0 $18,681 $8,593 0 632,792 5,729 638,521 159,630 478,89033 $0 $18,984 $8,733 0 643,043 5,822 648,865 162,216 486,64934 $0 $19,291 $8,874 0 653,460 5,916 659,376 164,844 494,53235 $0 $19,604 $9,018 0 664,046 6,012 670,058 167,515 502,54436 $0 $19,921 $9,164 0 674,804 6,109 680,913 170,228 510,68537 $0 $20,244 $9,312 0 685,736 6,208 691,944 172,986 518,95838 $0 $20,572 $9,463 0 696,845 6,309 703,153 175,788 527,36539 $0 $20,905 $9,616 0 708,133 6,411 714,544 178,636 535,90840 $0 $21,244 $9,772 0 719,605 6,515 726,120 181,530 544,59041 $0 $21,588 $9,931 0 731,263 6,620 737,883 184,471 553,41242 $0 $21,938 $10,091 0 743,109 6,728 749,837 187,459 562,37843 $0 $22,293 $10,255 0 755,148 6,837 761,984 190,496 571,48844 $0 $22,654 $10,421 0 767,381 6,947 774,328 193,582 580,74645 $0 $23,021 $10,590 0 779,813 7,060 786,873 196,718 590,15446 $0 $23,394 $10,761 0 792,446 7,174 799,620 199,905 599,71547 $0 $23,773 $10,936 0 805,283 7,291 812,574 203,143 609,430



OR

POR

AT

E LEGA

CY

BUILD

ER

June-06-17 E.&O.E. of 12

ALTERNATE INVESTMENT

Policyyear

AnnualDeposit/Premium

3.00 %AnnualGrowth

Tax DueOn

Growth46.00 %

Tax onunrealized

capitalgains

TotalValue

After Tax

Cumulative RDTOH{RDTOH

Rate}Total

Dividend

TaxPayable

OnDividend25.00 %

After-taxLegacyBenefit

48 $0 $24,158 $11,113 0 818,329 7,409 825,737 206,434 619,30349 $0 $24,550 $11,293 0 831,586 7,529 839,114 209,779 629,33650 $0 $24,948 $11,476 0 845,057 7,651 852,708 213,177 639,531



OR

POR

AT

E LEGA

CY

BUILD

ER

June-06-17 E.&O.E. of 12

Corporate Legacy Builder - Home | Empire Life Corporate Legacy Builder strategy uses a portion of...

Documents

Transcript of Corporate Legacy Builder - Home | Empire Life Corporate Legacy Builder strategy uses a portion of...