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In business, you want to find the best way to grow your money and the most effective strategy to maximize your after-tax income!
Ladies and gentlemen, we think we hit the “jackpot”!
There is a strategy virtually kept secret by successful entrepreneurs which allows them to transfer the pre-tax profits of their businesses into an almost magical product.
This product not only allows them to grow their profits tax-free but also allows them to pay 100% non-taxable retirement income!
It sounds too good to be true but it is quite possible!
Below we will explain why this strategy is so advantageous and we how it works.
Don’t stop reading so you don’t miss out on this wonderful strategy.
The insured corporate annuity is a strategy that is almost magical and indispensable!
If you are the type to be discouraged when you hear complex tax terms, do not worry. You will find that they are actually easy to understand. In Quebec, there is a tax strategy for companies in the form of life insurance. It is called corporate insured annuity!
Essentially, the strategy is for your company to have permanent life insurance with participation on your life, by designating itself as the beneficiary of the policy.
The company will then use its gross profits to pay the insurance premiums for the policy once a year, which is considered an expense. Therefore, you will be using your pre-tax profits as an “investment” in some way to finance your life insurance.
Most of the time, companies choose a product that is paid for 10 years or 20 years which gives them annual premiums ranging between $10,000 and $30,000, depending on the amount of the coverage.
So far, it’s pretty simple. Your company has taken insurance on your life and is transferring its pre-tax profits to finance a large amount of insurance.
Well, that’s where you’re wrong! When you retire, your permanent life insurance will have been paid by your company, and the amount of coverage (for example, $1,500,000) will be guaranteed.
A bank will then take out the insurance coverage amount and then make a loan of up to 20 years, which will pay you a certain amount each year.
Since the bank provides you funds that is, in fact, a loan, it is non-taxable and does not even count as income. At your death, the bank will repay your loan from the benefits of your life insurance! This is ingenious.
In terms of the benefits for YOU and YOUR business, it’s simple:
Your business can save on tax by transferring and investing its gross profits in life insurance that will finance your retirement.
You will enjoy 100% tax-free, non-taxable income, for your retirement which does not even count as income.
It’s a strategy that uses a permanent life insurance product to save on tax every year to fund a source of non-taxable income for retirement.
Is there anything better than that? We doubt it!
It is an additional strategy that requires no management, no particular knowledge, and can easily be implemented, regardless of the area of expertise of your company.
The strategy of the insured annuity in 4 steps that are easy to understand!
But to help you better understand the incredible potential of this strategy, we’ll give you a hard-hitting example in 4 easy-to-understand steps. You will see, it’s pretty simple!
The first step is for your company to purchase permanent life insurance with dividends on your life by designating itself as the beneficiary.
The company can choose any amount, whether it is $ 1,500,000 or even $ 5 million.
As a simple example, let’s say $2,000,000 here.
In the second step, the company pays for the first 10 years of the contract, or the first 20 years (depending on the term), the insurance premiums to pay the insurance contract.
For example, for a $2,000,000 coverage, you could think of annual payments of $20,000 for 10 years.
This would result in a total premium cost of $200,000 that the company will have paid from its gross profits.
When the time to retire comes, you will see your bank to provide, as guarantee, your life insurance in return for a corporate insured pension. This means that the bank will agree to give you a loan each year for a certain number of years.
Considering your current life insurance coverage of 2 million, bankers generally agree to pay you between 80-90% of the value of your life insurance.
Let’s stay conservative and consider 80%. The bank will, therefore, accept your life insurance as collateral and will agree to pay you annuities each year up to a maximum loan of $1,600,000, or 80% of your coverage of $2 million.
For example, a bank could lend you $60,000 a year for 20 years. This would give you a total of $1,200,000 in non-taxable revenue generated. You will still have $400,000, free and clear, before you reach your $1,600,000 limit. Considering that your loans will run at interest and that the balance will increase each year until your death, this is a realistic scenario.
You will have paid $200,000 through your business to generate $1,200,000 in non-taxable income. Not a bad strategy!
Once you have benefited from your retirement by having non-taxable income paid into your account each year, you will not have to worry about leaving a big debt to your heirs.
When you die, the bank will automatically reimburse the balance of your annual loans (the sum of all your income paid) out of the proceeds of your life insurance.
Say, for example, that the balance (with interest) of all your withdrawals is $1,525,000 upon your death. Well, the bank will use your life insurance to pay off this debt, then the balance of your life insurance, in this case $ 475,000, will be paid to your heirs.
You will not only have benefited from tax-free retirement income but at the same time, you will not leave behind any debt and your heirs will even be able to enjoy a legacy.
The corporate insured annuity is definitely a product that offers you benefits at all levels, as much for the taxation of your business, as for planning your retirement and even your estate.
As you can see, the corporate insured annuity is financially very profitable and interesting. But to add and finally convince you that this is a strategy you cannot do without, here are 5 other reasons!
As mentioned earlier, the government does not currently consider the income that the bank pays you in exchange for a guarantee on your life insurance, because in reality, it is a loan you are obtaining. The government does not recognize a loan as a source of income, so it cannot tax you.
But that’s not all. Since it does not consider these “borrowing revenues” as a source of income, you are considered poor in the eyes of the tax people and benefit from ALL the social programs of the government. You enjoy an easy retirement in the sun while being perceived as poor in terms of tax. It is almost too good to be true, but it’s really a strategy that works!
Since banks will only allow you to borrow up to 80-90% of the value of your life insurance policy, 10-20% of it will go to your heirs. After having paid for your final expenses, there will be enough for a nice legacy for your heirs. Therefore, you will not only enjoy a tax-free retirement but you will leave behind a significant legacy to your loved ones. An interesting way to plan your retirement and your estate at the same time.
As you can see in the example above, the revenue you derive from this strategy compared to the cost of premiums paid is quite beneficial. In the end, you benefit from very generous non-taxable income that far exceeds the total amount of insurance premiums you paid through your company’s profits. If you take the time to calculate the return on your capital with a life insurance advisor, you’ll see right away that the numbers speak for themselves!
If you choose to buy a participating permanent life insurance product, you can invest extra money in your policy that will act like an RRSP which means that it will grow tax-free. Your life insurance becomes a good tax vehicle where you can put your money.
Finally, the strategy presented is one that has proven itself and which, historically, was always very profitable as much for the companies as the insurers that offer them.
Since the mid-20th century, insurers offering this type of product have always enjoyed good profitability. For you and your business, it means you can transfer money between your business and yourself without paying for personal taxes.
Let’s just say that the corporate insured annuity is a very interesting strategy that is hard to beat for entrepreneurs who want a reliable, safe, and stress-free plan!
We hear you. We know that now that all the positive points have been said, you want to know the negative sides of this strategy.
In fact, there is very little in terms of the corporate insured annuity, but there are some risks to be aware of!
The tax laws may change: Indeed, the government may decide to change the laws on taxation of insurance products in the future. This could have an impact on such a strategy. The government does not change its laws often, but it can happen. If you want to know the effects of a change, just talk to an advisor who offers the insured annuity.
Interest rates can go up: If interest rates go up, it means your borrowing to finance your retirement will increase faster which will make you reach the limit of your insured annuity more quickly. However, when interest rates rise, rates of return generally follow, so your coverage will increase. In the end, it can offset the risk!
As you can see, the risks are not very significant.
Well, you may be wondering if this product and this strategy apply to you or if it is reserved for certain types of businesses.
In fact, the answer is simple: this strategy works for ALL entrepreneurs and self-employed people who are INCORPORATED.
If you are incorporated, you can take advantage of the corporate insured annuity.
Entrepreneurs, doctors, real estate investors, business executives, pharmacists, self-employed workers, etc., can simply put this strategy in place.
To do that, you simply have to meet a life insurance advisor who offers this type of product.
Fortunately, you are in the right place to do it.
Just fill out our free online request form and you’re done!
How to find the best insurance brokers in the province?
Are you now excited about corporate insured annuity and have become convinced (just like us) that this is probably one of the best tax strategies in the market?
It is not for nothing that the corporate insured annuity is the best kept secret of business people. It’s a strategy that not only allows you to transfer pre-tax profits but also allows you to plan 100% tax-free retirement income!
If you want to know more or plan the implementation of this strategy, you are in the right place!
Fill out our free and no obligation form and we will put you in touch with a life insurance advisor who specializes in this type of strategy! It is as simple as that!
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