The tax planning advantages of permanent life insurance

The Ritcey Report

Written by Lynn Healy-Goulet
January 4, 2018

Tax planning should perform two functions: reduce your taxes while you are alive, as well as after you die. Permanent life insurance enables to cover both bases at once:

  1. You can transfer your assets into the policy, income and estate tax free.
  2. You can build up tax-deferred growth of cash inside the policy.

Key issues

When people think about insurance, they generally envision how it will help those they leave behind. It can let you pay for a child’s future college education, provide a retirement fund for your spouse, or simply make sure your survivors have the money to live the lifestyle you want for them.

Life insurance also gives you the ability to transfer a policy’s death benefit income-tax-free to beneficiaries. No matter how big the death benefit is, your beneficiaries won’t pay a single cent of income tax on the money they get. What other investment does that?

One of the advantages of my affiliation with Scotia Wealth Management and Scotiabank1 is that they offer a wide and powerful range of insurance options to clients, designed to fit virtually every conceivable set of personal and family circumstances. Let’s take an example.

The case for converting a term policy to a permanent policy

Say you have a term policy. Before your existing term policy expires, you can convert a portion or all of it into a permanent life insurance policy, without having to go through the underwriting process, depending on the terms of your contract.

Permanent life insurance is designed to address your permanent needs such as estate planning, tax liabilities, and business succession planning. And, as with term insurance, your beneficiaries receive the proceeds from the death benefit tax-free and avoid probate fees and delays.

Other benefits include:

  • Coverage throughout the insured’s lifetime with no increasing premiums.
  • Tax-deferred asset growth. No tax is paid while the assets remain in the policy, thereby enhancing your estate.
  • The flexibility to accelerate your premium payments.

Review your insurance coverage

It’s vitally important to review your insurance coverage on a regular basis, to evaluate how insurance fits into your wealth plan and how it aligns with your current and future financial needs and goals.

Life is dynamic and situations change. Has your family grown? Has your marital status changed? Have you started a business?

Each person’s financial obligations at various points in their life are diverse. I can determine if any major changes in your personal and family circumstances suggest that now is the right time for you to explore your insurance options and, if appropriate, convert to permanent life.

Colin Hicks, Insurance Consultant

If you check out The Ritcey Team website under Team of Specialists2, you’ll see the profile of Colin Hicks, our Insurance Consultant. Colin has been in the estate planning and financial services industry for several years and brings with him comprehensive life, pension and distributor support experience. He provides The Ritcey Team with fully integrated insurance strategies that can assist you in meeting your specific goals for building, preserving and protecting your wealth.

It would be my pleasure to introduce you to him.

Dave Ritcey, The Ritcey Team, Scotia Wealth Management


1 http://www.scotiabank.com
2 https://ritceyteam.com/team-of-specialists