building the family legacy

Wealth management and the “I” word

Insurance can complement your ability to achieve goals in a cost effective, tax-efficient manner

Life insurance certainly offers financial protection in the event of sudden unexpected events, but it is also a flexible tool to help you build wealth and achieve your goals. That’s because permanent life insurance accumulates cash value with the advantage of deferring taxes. Also, unlike many other classes of investments, life insurance benefits are guaranteed. These unique features can therefore contribute to safeguarding and transferring your financial legacy, whether you’re planning a business succession, property succession or considering a charitable gift.

“Insurance can be a ‘cost effective, tax-efficient’ strategy to help prepare for the future,” says Jeff Fray, Richardson Wealth’s Vice President of Insurance Services. “This includes keeping a family business intact, creating a philanthropic legacy, or being in a better position to pay taxes on capital gains realized or to offset estate settlement expenses.”

Life insurance is tax exempt, enabling investment to occur within a properly structured permanent policy:

  • By investing within a permanent life insurance policy, you can shelter an additional part of your personal or corporate investment portfolio from taxes.
  • Premium deposits can create cash value that grows over time, by investing in either mutual funds, GICs and ETFs, or by participating in policy dividends.

Thinking about insurance, particularly when it comes to more complex financial matters, can be overwhelming for many. That’s because most of us have had a less-than-favourable experience with what Mr. Fray amusingly calls “the ‘I’ word.”

“Everyone has a story about the brother-in-law or uncle who sold them a $10,000 death benefit policy and then 10 years later, a smooth-talking salesperson told them, ‘You did it all wrong. Cancel that policy and buy this one instead.’ That might have left a bad taste or trigger a predisposition to say, ‘No thanks, I don’t need insurance.’”

Mr. Fray suggests talking to your Investment Advisor to see how insurance can be used more effectively as a financial tool to address your unique goals and objectives.

In addition to quizzing you about your requirements and goals, here are some of the key topics of discussion you can expect when you meet with your Advisor:

  • Do you have a will?
  • Does your will provide instruction on executing your affairs in the manner of your choosing?
  • Do you have a business structure? A shareholders’ agreement? A holding company?

“These are very important questions, particularly if you have concerns surrounding business succession or vacation property succession and tax implications for the next generation.”

During these discovery meetings, your Advisor may invite Richardson Wealth’s in-house experts in Estate and Tax Planning, Legal Affairs, as well as Insurance, to better understand your main issues and concerns. This will help the wealth team offer you more customized planning and sound wealth management advice.

“My objective is to understand your long-term financial goals and concerns, whether it is providing for the care of a disabled child or managing illiquid assets with major tax implications. Of course, insurance is not a panacea for every problem, but it is a creative solution that can complement or help achieve your goals,” Mr. Fray says, adding that for many clients, insurance is also a key consideration to safeguard the legacy they intend to leave.

“There are many generous Canadians who seek professional advice for increasing the amount of their charitable donations,” he says. “If philanthropy is a top priority for you, we can explain the difference between giving an annual gift to charity in perpetuity and utilizing an insurance strategy to turn one dollar of capital into five or seven dollars as a bequest from their estate. The latter will not only support your financial goals, it can buy a new MRI machine at the hospital.”

Mr. Fray emphasizes that developing a comprehensive and effective insurance strategy as part of a sound wealth management plan, is a highly nuanced undertaking.

“The Advisor’s role is much bigger than just providing insurance. It’s about providing you with comprehensive advice. Insurance may or may not be part of a creative solution,” he says. “It all starts with you discussing with us what you want and the Advisor giving the best advice to address those wants in the most cost effective, tax-efficient manner possible.”

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