Ashley Mangles specializes in wealth strategies and investments for business owners and high-net-worth clients.

The challenge for most business owners, regardless of whether they own an operating company (“OpCo”), holding company (“HoldCo”), or both, is how to maximize the benefit from all that hard work.

A corporate investment shelter strategy may be an option. It is designed for business owners with surplus corporate assets. This innovative concept uses permanent life insurance to reduce taxes payable on these investment assets and maximizes the estate value to your loved ones.

Tax-exempt life insurance provides a unique financial instrument that allows you to provide traditional insurance-based protection and tax-sheltered investment growth. Deposits in excess of the minimum amount to pay insurance costs can grow tax-exempt, while the proceeds received as a consequence of death are tax-free (including any accumulated growth).

Corporate life insurance proceeds in excess of the adjusted cost basis (ACB) of the policy create Capital Dividend Account (CDA) credits which your corporate beneficiary can use to declare and pay out a tax-free dividend. Any remaining insurance proceeds can be paid out using taxable dividends. The CDA is a notional tax account that permits the tax-free flow through of certain amounts to the shareholders of the corporation.

Funds in this strategy will grow tax exempt and are still accessible in a variety of ways.

This solution not only relieves the corporation of ongoing tax on the interest growth and provides optimal tax-exempt growth, but when held until death it also maximizes the net after-tax estate to the next generation from their otherwise trapped corporate investments.

There are many investment and insurance strategies that can help maximize return and transfer of wealth, especially with complex situations. The strategies you implement should be tailored to your specific situation and needs. If this is a new concept to you, or if you would like any more wealth management information, please contact me.

Ashley Mangles is an Investment Advisor at RBC Dominion Securities (Member–Canadian Investor Protection Fund). Insurance products are offered through RBC Wealth Management Financial Services Inc., a subsidiary of RBC Dominion Securities Inc. This article is for information purposes only. Please consult with a professional advisor before taking any action based on information in this article.

Ashley specializes in wealth strategies and investments for business owners and high-net-worth clients. He can be reached at Ashley.Mangles@rbc.com, or 250-334-1504.

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