Corporate Estate Planning

Business owners often have private corporations with significant investment portfolios. 

The funds for these corporate investment portfolios include retained earnings of an active business, growth on passive investments, and the sale of business assets. The retained earnings of active businesses often come through the ownership of holding company shares. The holding company, in turn, owns operating company shares. Since most inter-corporate dividends are tax-free, no double taxation applies, and an owner can retain earnings through their holding corporation.

Corporate estate transfer is a planning strategy for private corporations using corporate-owned life insurance to maximize corporate asset values transferred to the next generation.

This strategy is designed for corporations carrying on active business and earning excess cash flow for investment, as well as investment holding companies earning passive income from investments. Using this strategy gives you life insurance protection today, a tax-advantaged asset accumulation, the potential to access asset values in retirement, and significantly higher after-tax estate values.

The corporate estate planning concept

1. The corporation acquires a life insurance policy, where the corporation is the owner and beneficiary of the policy.
2. Over time, deposits are funded from the excess corporate cash flow. An increase in policy value is not subject to taxation.
3. If desired or required, policy cash values can be accessed to supplement retirement income. Tax implications depend on the method used to access the cash value
4. Upon estate, the insurance proceeds are paid tax-free to the corporation and are credited to the capital dividend account of the corporation. (CDA)
5. The corporation can distribute tax-free capital dividends to shareholders using the CDA.