Business, Financial & Legal
Life Insurance Evolves With Us By Bill Allan, CFP Sun Life Financial
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o other financial instrument can match Life Insurance’s ability to evolve as our finances and families change. In our early years, when savings are low and debt is high, we expect to be able, through talent, energy and motivation, to provide a lifetime of security for our families and ourselves. But if something untoward happens, Life Insurance provides protection for the people we care about but can no longer care for. The proceeds can be invested to eliminate debt and provide a modest lifetime income for spouses, as well as fund the education of children, pay for their weddings, and provide a down-payment on their first homes. Life Insurance can also benefit aging parents predeceased by their care-giving child. Taxation Over the years we build assets we want to pass down to our families. Life
Insurance can provide the liquidity required to keep assets intact during transfer. Deferring the payment of tax is a kind interest-free loan from the government that we leverage by keeping the deferred taxes invested rather than withdrawing them annually for remittance to the CRA. However, deferred tax is payable at death. There are three good reasons to use Life Insurance to pay this liability: • It’s usually less expensive to pay deferred taxes with life insurance than to sell the asset or to borrow the money; • The assets are probably worth keeping intact and difficult to replace. Selling a portion to pay taxes could jeopardize the business or portfolio; • Having the cash on hand to pay creditors can lift a tremendous burden from beneficiaries. Once the taxes are paid, they can choose when and how to manage the assets.
Equitable distribution of real assets: children How do we divide our estate when the largest portion is a farm or other business? When some children are interested in our ongoing interests and the others only want to be treated equitably, life insurance can provide liquidity to keep peace in the family, providing those who aren’t interested in the farm, business or other family enterprise with a cash inheritance, while the interested children receive the real assets. Equitable distribution of real assets: second spouse Remarriage can create a tremendous amount of stress on an estate. The second spouse may choose not bequeath assets to the children from whose parent the assets were received, and may have other or new beneficiaries to consider. The second spouse may also be younger, forcing the children to wait much longer for their inheritance. Additional Life Insurance can be purchased to provide for the second spouse, so the estate to the children will remain the same.
Leaving a legacy Many donate time or money to worthwhile causes. Life Insurance can replace what would have been given, or it can be an additional gift. Redirecting an investable asset through Life Insurance often results in a larger gift than if the asset itself was bequeathed! Through proper planning we can build an Insurance Portfolio that meets our needs today, but will evolve with us. In the next issue of Fine Lifestyles Regina, we’ll discuss some of the tools we use to implement our strategy. Bill Allan, CFP Sun Life Financial (306) 757-8631 x 2207 Toll Free 1-866-996-9996 x 2207 Bill.Allen@sunlife.com
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