Creating a taxsmart
There may come a time, either approaching
or during retirement, when you have a
certain amount of savings earmarked for
your heirs. Ordinarily, these would pass
through your will to your intended
beneficiaries. But there may be a better way.
When these funds are fixed-income
investments in a non-registered account,
interest income is fully taxable each year at
your marginal tax rate. With a few simple
steps, you can move these funds into a
tax-sheltered environment, resulting in a
larger inheritance for your loved ones.
How it works
The vehicle is a universal life insurance
policy, which includes both an insurance
and investment component. You make a
series of deposits over time, with part of
the deposit covering the insurance premium
and the rest invested.
You have a wide choice of investments,
including fixed-income and guaranteed
choices suitable for the inheritance. No tax is
paid on investment income within the policy
- thatâ€™s the key benefit of this strategy.
The net result
With this strategy, your heirs receive the
proceeds of the insurance policy directly,
without delays of estate administration. This
includes the balance in the tax-exempt investment
component as well as the life insurance
portion - so if you purchased a $500,000
policy, that's $500,000 for your loved ones.
All proceeds are tax-free. Sound like something
that might suit your estate planning
needs? Then give us a call to talk about this
tax-saving inheritance strategy.