Corporations sometimes take the form of investment holding companies.

This can occur due to the sale of an operating business or because the company was a former professional services corporation.

Holding companies may hold low risk investments to provide the capital protection required for estate planning and also stable investment cash flows. The return provided by such low risk investments is often very low and subject to the highest rate of corporate tax.

Often times these holding companies are exposed to unfavorable tax consequences at death further eroding the estate’s value.

There are strategies that can be employed to meet the income security and tax efficiency objectives of a client.

 

A Corporate Insured Annuity strategy may meet many or all of these investment objectives - i.e. guaranteed and enhanced income/cash flow, capital preservation and tax efficiency.

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The strategy requires the use of a life annuity, which provides a guaranteed cash flow for the life of the client, and a life insurance policy which replenishes capital to the estate at their death.

 

The life insurance proceeds paid to the corporation will also create Capital Dividend Account credits, which can be used to pay a tax free dividend to the shareholders.

The purchase of a life annuity within a corporation should reduce the holding company value by the cost of the contract.
This will result in a lower tax bill upon the disposition of shares at death.

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As with the personal insured annuity strategy, the short and long term benefits are usually very clear and significant. 

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We look forward to discussing these and other corporate investment possibilities with you.

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