Insurance strategies for seniors By Ivan Cons

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The future dollars provided by a life policy either on and individual or both spouses jointly, is the most straightforward tax efficient and cost efficient method to offset the impact of taxes on an estate.  

The same methodology can be applied to future capital gains on non-residential real estate including recapture of depreciation which can once again have a serious impact on an estate.

Many people are unaware that a niche strategy exists for high net worth individuals to accomplish the above.  This strategy, called the Insurance Funding Strategy, allows the policy holder to reduce the net annual cost of the life insurance policy. 

There are specific criteria the individual must meet in order to put this in effect, however significant savings can be generated.  It is important to consult with your tax advisor prior to putting this strategy in place.

To summarize, insurance, when used effectively can offer considerable tax savings. 

I am often asked what value life insurance plays in estate planning and how it works to minimize future capital gain taxes that may be applicable on an estate.  

Upon the demise of both spouses RRSPs and RRIFs become fully taxable and are no longer sheltered.  This means that the children will not inherit the full value of these accounts tax free. It is often recommended to purchase life insurance with part of the proceeds of a RRIF to ensure that the estate stays intact.