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Many Canadians consider their Registered Retirement Saving Plan (RRSP) to be their best tax shelter. However,
Universal Life (UL) insurance has become an increasingly popular long-term financial planning tool that also offers
tax-sheltering benefits. What makes UL insurance so popular is that it combines two essential financial planning
components into one package: life insurance and tax-sheltered investment savings.
This article will take an in-depth look at how UL insurance works, and why it is a great investment tool to meet any
Canadians financial planning needs.
Universal Life
the deposit maximum. This makes a UL policy particularly attractive to high-income earners who have already
maximized their RRSP contributions.
In addition, the investments are your choice! A wide range of eligible investments can be selected to provide flexibility
and control over the management of the savings portion.
Universal Life
offsetting the taxes payable and preserving the full value of your assets for your heirs. Significant savings in premium
costs are achieved by structuring the UL policy to pay its death benefit upon the death of the last spouse.
2) Protection Against Capital Gains Taxes:
Over a lifetime of hard work, many individuals accumulate significant assets such as a business, investments or real
estate. Eventually, these assets can be subject to significant capital gains taxes. A UL policy can help those who wish to
pass on capital property (such as a ski chalet, family cottage or business interest) without having to liquidate the assets
in order to pay the capital gains tax.
3) Tax-Sheltered Investing Outside of a Registered Plan:
For individuals who have paid off their mortgages, maximized their RSP contributions and have excess cash flow
available for investment, a UL policy can help. It is a savings vehicle that allows you to invest non-registered money
on a tax-sheltered basis so as to maximize investment growth and create more income available for retirement. This
policy is best suited to high income earners at the top marginal tax rate.
4) Tax-Sheltered Estate Accumulation:
Many individuals desire to provide a special bequest at the time of death to benefit a charity, a loved one, to provide
education funds for a grandchild, or for any other purpose. A UL policy can alleviate concerns about taxes or probate
fees eroding the value of an estate. Such a policy would be suitable for investors concerned about the negative tax
consequences of most non-registered investments and for those who want to maintain the liquidity of their assets in
order to access the funds during their lifetime.
Universal Life
Universal Life: How Does It Work?
UNIVERSAL LIFE: HOW DOES IT WORK?
If you
live
If you
live
Money
moves
fromfrom
accumulation
to insurance
to keep
policy
in force.
Excess
in in
Money
moves
accumulation
to insurance
to keep
policy
in force.
Excess
accumulation
grows
tax
free;
could
later
be
used
as
income.
accumulation grows tax free; could later be used as income.
Universal Life
If you live:
Money moves from accumulation to insurance to keep policy in force. Excess in accumulation grows tax free; could
later be used as income.
Upon death:
die
The death benefit is paid Iftoyou
beneficiary
from insurance; contents of accumulation go to party stipulated by policy
Death benefit is paid to beneficiary from insurance; contents of accumulation go to party
owner. Both amounts arestipulated
paid to the
recipients
on aamounts
tax-freearebasis.
by policy owner. Both
paid the recipients on a tax-free basis.
This summary is brought to you by Raymond James Financial Planning Ltd. (RJFP) for informational purposes only. Statistics and factual data and other information are from sources
RJFP believes to be reliable but their accuracy cannot be guaranteed. This information is furnished on the basis and understanding that RJFP is to be under no liability whatsoever in respect
there of.