You may have a tax time bomb ticking and not even know it! Are you prepared for the fact that the Government will claim a large portion of your estate?
Here’s the problem
When you die, your assets can be transferred tax free to your spouse.
But, when your spouse dies and the assets are passed on to other heirs, 50 per cent of the increase in the value of some assets will be subject to tax.
So, assets like your vacation property and investments left to your heirs may be subject to capital gains tax.
And this tax is paid before your heirs get anything. It’s a tax bomb that most people are unaware of and don’t plan for.
What are your options?
Creating an effective estate plan means making sure your beneficiaries are looked after. There are a number of ways to help pay this tax, but which one is best for you?
The alternatives:
You or your family can start saving today, your heirs can borrow the required funds from the bank, your estate can sell the assets, or you can purchase life insurance to cover the growing liability.
The best solution
Life insurance can be the most effective estate planning tool to fund the tax liability. A universal life policy can provide you with tax-free cash exactly when it is needed to pay the future tax obligation.
It ensures that your heirs don’t lose their inherited assets because of a large tax bill.
Your heirs get the property you intended them to receive and you get the peace of mind that comes from knowing this will happen.
Today’s guarantees and flexibility bring tomorrow’s peace of mind.
Certain universal life policies are designed for people who want to finish paying for their life insurance protection within a certain time period.
Easy to understand and manage, it offers permanent insurance protection with guaranteed insurance costs, guaranteed cash values, choice of payment periods and opportunities for tax-deferred growth in a variety of investment options. Customize a life insurance solution that’s right for your lifestyle, budget and financial goals by adding extra features such as a term insurance rider, child protection rider, business value protector rider or a total disability waiver rider at any time of your choosing.
Choose from a wide range of investment account options including fixed interest and managed accounts, including some with guaranteed minimum interest rates.
Remember to always consult your advisor before taking any action.
Stuart Kirk is an Investment Funds Advisor with Manulife Securities Investment Services Inc and a Retirement Planning Specialist with Precision Wealth Management Inc. The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Investment Services Inc or Precsion Wealth Management Inc. For comments or questions Stuart can be reached at stuart@precisionwealth.ca or 250-954-0247.