1 minute read
Life insurance is not just for emergencies
Common Cents with Jacob Gaudet
Many people think that life insurance is only for emergencies the most pressing emergency being the death of the policy holder. And it’s true that most people take out life insurance in case the worst happens, and they need the payout to replace income, pay off debts and cover their final expenses.
Advertisement
As the decades pass, and you reach your 50s, you may well feel that the reasons for having life insurance are no longer valid. Your mortgage is paid off, your kids are grown up and a bigger priority is boosting your retirement savings. If you bought term life insurance, which expires after a certain number of years, you’ll likely let it lapse, happy that you didn’t need it However, keeping your family financially secure should the worst happen is just the tip of the iceberg of what life insurance can do.
Most people aren’t aware that life insurance can also be used for complex estate planning strategies. Here are a few ways life insurance over 50 could be a very useful financial strategy that goes far beyond dealing with emergencies.
Cover estate taxes
Life insurance over 50 can be a good plan of action if you intend to pass a big asset on to your kids, such as a cottage or shares in the family business. In this situation, your estate could get hit with a serious tax bill after you die For instance, if your cottage has appreciated in value by $1 million and you’re in the 50% tax bracket, the tax on the capital gain could be as much as $250,000.
Your executor might have to sell the cottage or find cash elsewhere in the estate to pay the CRA. Having permanent life insurance over 50 could avoid this situation After you pass away, your estate would get a tax-free lump sum of cash that can be used to pay off your estate’s tax bill. It’s one way to fund your final tax bill for the lowest cost.
Passing on a fair inheritance
Typically, people want their estate to be divided equally between their offspring. However, in many cases, dividing up assets equally is not a cut and dried process.
on page 26
