First of all, what does it mean to build a legacy? It simply refers to a technique used to maximize the value of a share one’s wealth that you plan on not using during your lifetime.
It is in the form of a guaranteed investment, tax-free, that this strategy is presented. Thus, funds can be set aside for the next generation or for a charitable cause.
Many people keep some of their assets that they plan to leave as a legacy and don’t plan to use.
But why do some people decide to build a personal legacy?
If you have the right profile, building a personal legacy allows you to:
In addition to providing a significant legacy to your heirs, life insurance can also help you to achieve your dreams and goals.
Whether you dream of traveling around the world or plan to build a house from the sweat of your brow, these are projects that require cash.
You will see an example below of how much a life insurance policy can significantly increase your legacy.
Speak to life insurance advisors to obtain an insurance package that is tailored to your needs.
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Due to the tax regulations on life insurance, it is possible to leave a substantial amount of money to your estate as well as amend clauses designating beneficiaries in usufruct (the right to enjoy something belonging to another) or those in bare ownership (the right to keep something).
When it comes to alternative investments, they gain interest over the long term as the legacy is built gradually as you invest your funds and accumulate interest.
POPULAR TECHNIQUE FOR BUILDING A PERSONAL LEGACY
Many popular investment products are taxable, creating a tax burden at the time of death.
These investments are more complicated to pass on as a legacy without any transfer, inheritance, valuation, or probate fees.
In contrast, by building your personal legacy, you can use your extra income or capital to subscribe to a permanent life insurance.
You can deposit the money monthly or annually, based on your preference, for a predefined period or for life.
Of course, as with any life insurance product, the money deposited varies based on age, gender, health status, and level of taxation.
To help you better understand the significant advantage that an alternative investment or life insurance for building personal wealth can give, we present a table below.
All figures shown in this table are based on the example of a 33-year old male, non-smoker.
The example below is based on participating life insurance for a coverage of $1 Million with deposits distributed over a period of 8 years.
Regarding the posted figures of the alternative investment, they are based on a 4% interest rate per year, with 40% tax and a 100% interest rate growth.
HERE ARE 2 METHODS FOR ESTABLISHING A PERSONAL LEGACY*
LIFE INSURANCE VS. ALTERNATIVE INVESTMENT SIDE-BY-SIDE
How does life insurance work?
Death benefit for your estate
|How alternative investments work||Life insurance benefit in % every year|
|Age of the policy||How much do you pay for the premium or deposit amount?||Interest on the investment||How much will you pay for taxes?||Amount accumulated in anticipation of a personal legacy|
|1 year||$26,391||1 million||$1,055||$422||$27,025||3600 %|
|2 years||$26,391||1 million||$2,135||$855||$54,695||1730%|
|3 years||$26,391||1 million||$3,245||$1,300||$83,030||1100%|
|4 years||$26,391||1 million||$4,380||$1,750||$112,050||790%|
|5 years||$26,391||1 million||$5,540||$2,215||$141,770||605%|
|6 years||$26,391||1 million||$6,725||$2,690||$172,195||480%|
|7 years||$26,391||1 million||$7,945||$3,180||$203,350||390%|
|8 years||$26,391||1 million||$9,190||$3,675||$235,256||325%|
|9 years||$0||1 million||$9,410||$3,765||$240,900||315%|
|10 years||$0||1 million||$9,635||$3,855||$246,670||305%|
|15 years||$0||1 million||$10,850||$4,340||$277,735||260%|
|20 years||$0||1 million||$12,215||$4,890||$312,700||220%|
*A cash advance on the cash value of a life insurance policy may be taxed on its adjusted cost base. On the other hand, the life insurance benefits are not taxable at the time of death.
The table above is for illustration purposes only. It does not represent an insurance price guarantee. The tax figures in this table were based on Canada’s Income Tax Act and its various regulations.
Any amendment to the said Act or regulations may affect the figures presented in this table. It is advisable to speak to a life insurance broker or financial advisor to find out which strategy is beneficial to your situation.
In the case of a life insurance with an alternative investment of which the policyholder is a business entity, the table shows what would be the net estate value, based on life insurance and alternative investment capital paid at the time of death. This table does not show any gain in capital value for the for the eventual disposition of any shares at the time of death.
No figure in the above table represents any guarantee in cost. It is strictly based on the various criteria mentioned above. The actual amounts may be lower or higher, depending on the characteristics of the individual applicant.
To know the actual amounts based on your personal situation, fill out the form on this page and ask for your quote, free and without any obligation. One of our partners will be happy to find you an offer tailored to your needs.
If the time has come for you to plan your estate, seek the advice of a qualified professional. You can avoid risky investments and ensure that you have the best product for building a significant legacy.
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