Participating Permanent Life Insurance With Cash Value
Trusted by 1000+ physicians Canada wide
Currently a 6.25% dividend interest rate.
Similar to an RRSP, funds inside a participating whole life policy grow tax free.
Once dividends are paid, the increased cash value and death benefit value are guaranteed. The values vest immediately.
Participating whole life portfolio is well recognized for its diverse asset allocation.
Life Insurance is now the only tax exempt asset you can hold in your corporation.
Our Process
Initial Meeting
We gather information so an holistic recommendation can ben made that is reflective of your needs.
Recommendation
With experience and knowledge, we're able to offer many diverse and individual solutions that may not otherwise be considered
Application and Underwritting
We have established systems and contacts in place to help us process your case. We operate under strict compliance rules requirements of disclosure, CASL, privacy and all sales related documents.
Delivery
We ensure the contract is implemented correctly and provide a complete summary of your new policy.
Service
We reach out annually with a summary and offer to review or re-evaluate rating and eligibility options. We update as life and family changes occur. As part of your team, we are here to help along the way.
Claims
While we understand that claims are a part of the process, we're here to offer comfort when it counts. Our proactive approach ensures we provide support and assistance to get the claim processed efficiently. Our goal is to make the situation better for you, allowing you to focus on recovery.
Initial Meeting
We gather information so an holistic recommendation can be made that is reflective of your needs.
Recommendation
With experience and knowledge, we’re able to offer many diverse and individual solutions that may not otherwise be considered.
Application and Underwritting
We have established systems and contacts in place to help us process your case. We operate under strict compliance rules requirements of disclosure, CASL, privacy and all sales related documents.
Delivery
We ensure the contract is implemented correctly and provide a complete summary of your new policy.
Service
We reach out annually with a summary and offer to review or re-evaluate rating and eligibility options. We update as life and family changes occur. As part of your team, we are here to help along the way.
Claims
While we understand that claims are a part of the process, we're here to offer comfort when it counts. Our proactive approach ensures we provide support and assistance to get the claim processed efficiently. Our goal is to make the situation better for you, allowing you to focus on recovery.
About Us
David Schwarz is a Certified Financial Planner®, Certified Health Insurance Specialist, and Professional Financial Advisor, specializing in life insurance and financial planning for incorporated professionals across Canada. He is dedicated to helping clients build long-term financial security through tailored insurance solutions. David’s approach is holistic, focusing on the unique needs of professionals and business owners. Outside of work, he enjoys hiking, and spending time with his two young kids.
Certifications
Whole Life As A Corporate Asset
Building Wealth Through Thoughtful Planning
Case Study 1
Raj, an Orthopedic Surgeon, earning a corporate gross income of $550,000 / year, and saving $200,000 / year in his corporation was confronted with a pressing issue that many incorporated professionals face, how to effectively allocate his savings in a manner that maximizes his returns whilst limiting his downside, and structured in a tax preferred manner. With $1 million already accumulated in corporate investments with no immediate plans for retirement, Raj was concerned about the potential impact of passive income on his small business deduction and the looming tax burden on his estate.
Our analysis revealed that Raj’s current situation exposed him to significant tax risks. First, investment gains earnt in a corporation is considered passive income. The passive income tax rate in his province was 50.17%. Secondly, his corporate investments were generating passive income that could reduce his small business deduction, with the potential to fully deplete the $500,000 deduction if passive income reached $150,000. Furthermore, upon his and his spouse's passing, their estate could face multiple layers of taxation, including capital gains on the disposition of corporate shares, capital gains on the sale of corporate investments, and dividend taxes on the distribution of assets to their heirs depending on the post mortem planning available at time of death.
The solution was to reallocate a portion of his corporate savings to a corporate-owned whole life insurance to address these challenges. Raj could achieve multiple benefits by allocating $100,000 to a tax-exempt whole-life policy over ten years. This strategy would provide a growing, tax-free investment within the corporation, avoiding the adverse effects on the small business tax rate associated with passive income. Additionally, it would create a significant death benefit to help fund estate taxes, with a projected value of $3,759,474 by age 85. The policy's cash value, accessible through various means if needed, offers flexibility for future financial planning. Most importantly, this approach would generate a capital dividend account credit upon death, allowing for tax-efficient distribution of assets to heirs and potentially saving hundreds of thousands in terminal taxes.
Case Study 2
Gary, aged 68, a business owner in manufacturing, has accumulated a real estate portfolio $5 million dollars in today's value. His goal is to see that the properties successfully be passed down to his two children. The problem Gary faced is how to ensure he has enough liquid cash to fund his tax liability. His assets consisted of his primary residence, his investment properties and shares in his company and his RRIF.
Without proper planning, the tax exposure can be substantial. For instance, based on a $5 million valuation, the tax liability could reach $1,784,500. We projected at life expectancy his estate to be worth north of an $8 million valuation, which would give rise to a $2,855,200 tax liability.
Without any planning, Gary’s estate would have two options to pay this bill. Sell two of the properties (Gary did not want this) or take on debt which meant collateralizing his real estate. Because Gary was proactive, he had a third option available to his, acquire a life insurance policy with a death benefit of $2.85M, this option would turn out to be the most efficient as he could acquire the policy for 50 cents on the dollar. He would have to deposit $1.4M over the course of 10 years, which gave him a $2.9M death benefit at age 85.
This approach not only helps preserve the estate's value for heirs but also provides peace of mind for business owners, knowing that their legacy is protected from potentially overwhelming tax burdens.
Case Study 3
Ana’s is an incorporated physician with $2 million of OMA flex term 20 life insurance owned and paid for personally. This plan costs $479 per month, and she planned to renew the plan for an additional 15 years after it expired until age 75. The renewal would cost $1340 per month. Ana was in the highest marginal tax rate of 53.53%, and was funding her insurance with after tax personal dollars. The total capital required, factoring in tax for this approach amounts to $1,618,592.
The proposed solution suggests moving the insurance into Ana’s corporation and switching to a permanent plan with a 10-year payment period. This approach offers $1,200,000 of coverage and builds a cash value of $872,417 by age 75, which can be accessed at any time. The total payment over 10 years is $341,041, which, when accounting for the 12.2% corporate tax rate, results in a total capital requirement of $388,429. This strategy significantly reduces the overall cost, provides guaranteed coverage, and builds cash value over time, with the added advantage of tax savings.
Key considerations favor the proposed solution: It addresses longevity risk, as the permanent policy ensures coverage regardless of how long Ana lives. It eliminates future insurability concerns, as the coverage is secured now rather than relying on future insurability at age 60. The proposed solution also offers impressive pre-tax equivalent internal rates of return of 12.1% by age 85, showing that whole life insurance is an excellent asset class.
Case Study 1
Raj, a successful surgeon, earning a corporate gross income of $550,000 / year, and saving $200,000 / year in his corporation was confronted with a pressing issue that many incorporated professionals face, how to effectively allocate his savings in a manner that maximizes his returns whilst limiting his downside, and structured in a tax preferred manner. With $1 million already accumulated in corporate investments with no immediate plans for retirement, Raj was concerned about the potential impact of passive income on his small business deduction and the looming tax burden on his estate.
Our analysis revealed that Raj’s current situation exposed him to significant tax risks. First, investment gains earnt in a corporation is considered passive income. The passive income tax rate in his province was 50.17%. Secondly, his corporate investments were generating passive income that could reduce his small business deduction, with the potential to fully deplete the $500,000 deduction if passive income reached $150,000. Furthermore, upon his and his spouse's passing, their estate could face multiple layers of taxation, including capital gains on the disposition of corporate shares, capital gains on the sale of corporate investments, and dividend taxes on the distribution of assets to their heirs depending on the post mortem planning available at time of death.
The solution was to reallocate a portion of his corporate savings to a corporate-owned whole life insurance to address these challenges. Raj could achieve multiple benefits by allocating $100,000 to a tax-exempt whole-life policy over ten years. This strategy would provide a growing, tax-free investment within the corporation, avoiding the adverse effects on the small business tax rate associated with passive income. Additionally, it would create a significant death benefit to help fund estate taxes, with a projected value of $3,759,474 by age 85. The policy's cash value, accessible through various means if needed, offers flexibility for future financial planning. Most importantly, this approach would generate a capital dividend account credit upon death, allowing for tax-efficient distribution of assets to heirs and potentially saving hundreds of thousands in terminal taxes.
Case Study 2
Gary, aged 68, a business owner in manufacturing, has accumulated a real estate portfolio $5 million dollars in today's value. His goal is to see that the properties successfully be passed down to his two children. The problem Gary faced is how to ensure he has enough liquid cash to fund his tax liability. His assets consisted of his primary residence, his investment properties and shares in his company and his RRIF.
Without proper planning, the tax exposure can be substantial. For instance, based on a $5 million valuation, the tax liability could reach $1,784,500. We projected at life expectancy his estate to be worth north of an $8 million valuation, which would give rise to a $2,855,200 tax liability.
Without any planning, Gary’s estate would have two options to pay this bill. Sell two of the properties (Gary did not want this) or take on debt which meant collateralizing his real estate. Because Gary was proactive, he had a third option available to his, acquire a life insurance policy with a death benefit of $2.85M, this option would turn out to be the most efficient as he could acquire the policy for 50 cents on the dollar. He would have to deposit $1.4M over the course of 10 years, which gave him a $2.9M death benefit at age 85.
This approach not only helps preserve the estate's value for heirs but also provides peace of mind for business owners, knowing that their legacy is protected from potentially overwhelming tax burdens.
Case Study 3
Ana’s is an incorporated physician with $2 million of OMA flex term 20 life insurance owned and paid for personally. This plan costs $479 per month, and she planned to renew the plan for an additional 15 years after it expired until age 75. The renewal would cost $1340 per month. Ana was in the highest marginal tax rate of 53.53%, and was funding her insurance with after tax personal dollars. The total capital required, factoring in tax for this approach amounts to $1,618,592.
The proposed solution suggests moving the insurance into Ana’s corporation and switching to a permanent plan with a 10-year payment period. This approach offers $1,200,000 of coverage and builds a cash value of $872,417 by age 75, which can be accessed at any time. The total payment over 10 years is $341,041, which, when accounting for the 12.2% corporate tax rate, results in a total capital requirement of $388,429. This strategy significantly reduces the overall cost, provides guaranteed coverage, and builds cash value over time, with the added advantage of tax savings.
Key considerations favor the proposed solution: It addresses longevity risk, as the permanent policy ensures coverage regardless of how long Ana lives. It eliminates future insurability concerns, as the coverage is secured now rather than relying on future insurability at age 60. The proposed solution also offers impressive pre-tax equivalent internal rates of return of 12.1% by age 85, showing that whole life insurance is an excellent asset class.
Is Permanent Insurance Right For You?
How The Participating Account Is Typically Invested
A balanced mix of fixed and non-fixed income assets to ensure stability and growth.
| Category | Asset | 2023 allocations |
|---|---|---|
| Fixed income -57% | Public bonds | 33% |
| Mortgages | 19% | |
| Private debt | 5% | |
| Non fixed income – 43% | Public Equities | 16% |
| Private Equities | 9% | |
| Real estate | 18% | |
| Total | 100% | |
Minimize Your Tax Liability
Leverage Whole Life Insurance for Tax Exempt Financial Growth
How the Sun Life Participating Account is Invested
A clear guide to reporting and processing your claim.
Step 1
Report the Claim
You can report your claims online, at our central office, on our central ClaimeCare helpline, through SMS or e-mail
Step 2
Process
Our special ClaimCare team will assess your claim, and inform you in case any further documents need to be submitted
Step 3
Settle
Once your claim is intimated, and we receive all the relevant documents, we will settle your claim
Step 1
Report the Claim
You can report your claims online, at our central office, on our central ClaimeCare helpline, through SMS or e-mail
Step 2
Process
Our special ClaimCare team will assess your claim, and inform you in case any further documents need to be submitted
Step 3
Settle
Once your claim is intimated, and we receive all the relevant documents, we will settle your claim
Frequently Asked Questions
Yes, an advantage of corporate owned life insurance is that the corporate tax rate is usually lower than the shareholder’s marginal tax rate; there is typically a cost advantage to having the corporation own the policy and pay the insurance premium where the corporation owns a policy on the life of a business owner.
The receipt of insurance proceeds by a corporation creates a capital dividend account (CDA*) credit which is calculated as the life insurance death benefit minus its adjusted cost base (ACB). Corporations can pay out tax-free dividends up to their CDA balance.
The capital dividend account (CDA) is a notional account created in the income tax act section 89(1). The CDA tracks tax-free surpluses in private Canadian corporations. CDA balances can be distributed to shareholders as a tax-free capital dividend.
Investment income earned in a corporation is considered passive investment income and the corporate tax rate on passive investment income is 50.17% in Ontario.
Depending on the type of income a portion may be refundable at 38.33% via the corporation’s Refundable Dividend Tax on Hand Account (RDTOH) once a dividend paid out to the corporation’s shareholder(s).
RDTOH is a preemptive payment of tax by corporation’s earning certain types of investment income, with the aim of corporations not benefiting from tax deferral over an individual earning that same income directly. As the name suggests, the prepayment of tax is refundable to the corporation when a dividend is payed out to it’s shareholder(s).
Typically we recommend looking at whole life for tax and estate planning purposes. From a cash flow perspective, we want to see retained earnings in your corporation before considering the viability.
1. Investment Returns
- Interest Rates: Participating policies are typically invested in a diversified portfolio, including bonds, real estate, and stocks. The return on this portfolio is a key driver of the dividend scale. Rising or falling interest rates significantly impact the investment returns and, consequently, the dividends.
2. Mortality Experience
- If the actual mortality experience (i.e., death claims) is better than what was initially priced into the policies (fewer claims than expected), it generates savings that can contribute to higher dividends.
3. Expenses
- Lower-than-expected administrative or operating expenses can lead to higher surplus available for dividend distribution, while higher expenses may reduce dividends.
4. Policy Lapse Rates
- Lapse rates refer to the number of policies that are terminated or surrendered early. If more policies than expected lapse, this can affect the company’s financial experience and impact dividend payouts.
There are four ways to access the cash value in your policy; a policy loan, a cash withdrawal, selling paid up additions or a loan from a financial institution. This is a common corporate savings plan strategy. A corporate strategy can be structured with either the corporation or shareholder borrowing against a corporate owned life insurance policy.
Term insurance is rented life insurance and is designed to protect you over a period of time, also known as the term. At the end of the term, the policy can be renewed or converted to permanent coverage.
A whole life plan is permanent coverage that grows each and every year. This is a non-passive investment funds grow tax free. Whole life insurance is an excellent savings vehicle for retirement and estate planning purposes and the insurance is guaranteed for life. Most clients starting out choose part term (for protection) and part whole life (as a savings and estate plan).
Underwriting timelines can vary depending on the complexity of the case. We usually see underwriting take on average 30-90 days.
Here’s What Our Clients Are Saying
Expert Guidance for Canadian Professionals
Our team tailors whole life insurance solutions for Canadian professionals like you. We understand the unique challenges and opportunities you face.