Business Owner Life Insurance
You've built a successful business. Now, let's ensure it's protected. I provide clear, tax-efficient strategies for succession, continuity, and key employee retention — for incorporated business owners and professionals across Nova Scotia, Ontario, and New Brunswick.
Strategic Life Insurance for Business Owners
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Corporate-owned life insurance: the overview
For an incorporated business owner or professional, the corporation often accumulates surplus cash that is taxed unfavourably if withdrawn personally. Corporate-owned life insurance lets the corporation pay the premium with after-tax corporate dollars, shelter growth inside the policy, and ultimately transfer wealth to shareholders' heirs through the Capital Dividend Account (CDA).
On death, the life insurance proceeds are received by the corporation tax-free. A portion equal to the adjusted cost basis is credited to the CDA, allowing the corporation to pay out a tax-free capital dividend to the shareholders' estate. This is one of the most efficient ways to move trapped corporate surplus into the hands of your heirs while protecting the business at the same time.
Corporate-owned permanent (often participating whole life) policies also build cash value that can be accessed during life through policy loans or as collateral for a bank loan — useful for funding business opportunities, buy-outs, or retirement.
Buy-Sell Agreement Funding
A buy-sell agreement is essential, but without proper funding, it's just a piece of paper. Life insurance provides the immediate, tax-free capital needed to buy out a deceased or disabled partner's shares.
- Prevents forced liquidation of the business
- Ensures fair compensation for the partner's family
- Maintains control among surviving owners
Key Person Insurance
Every business has individuals whose expertise, relationships, or skills are crucial to its success. Key person insurance protects the company against the financial shock of losing them.
- Provides cash flow during the transition period
- Funds the search and training of a replacement
- Reassures creditors, clients, and employees
Tax-Efficient Wealth Transfer
Corporate-owned life insurance can be a highly effective tool for moving trapped surplus cash out of your corporation and into the hands of your heirs, minimizing the tax burden.
- Utilize the Capital Dividend Account (CDA)
- Reduce corporate investment taxes
- Maximize the value of your estate
Estate Equalization
If you plan to leave your business to one child but want to treat all your children equally, life insurance provides the liquidity to balance your estate without liquidating business assets.
- Keeps the business intact for the active heir
- Provides fair liquid inheritance for inactive heirs
- Prevents family disputes over business valuation