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| e-News
Bulletin |
Issue
4 - November 15, 2004 |
In
this issue:
- Other than the obvious, why consider life
insurance?
- Insured Annuities Are a Good Option for
Retirement
- Health Services no longer covered by Ontario
Other
than the obvious, why consider life insurance?
Life insurance
is a critical part of estate planning – both for personal
and business reasons. Outside the desire to preserve your
estate and provide basic financial security for family members,
other needs should be considered. Here are a few areas to
think about:
Collateral
for a Business Loan
If your company has expansion in mind or would like to secure
funds to buy-out a retiring share holder, a life insurance
policy could be the answer. Here’s an example of how
it works. Excess corporate funds can be invested in an exempt
life insurance policy where they grow tax-free to build significant
cash value in the policy. At a later date when your company
needs cash, the cash value of the corporate-owned policy can
be used as collateral for a bank loan.
And, there
are significant tax advantages. The bank loan is tax-free.
The loan interest may be tax deductible if it is used for
investment purposes. The bank loan can be repaid when the
life insured dies. When this happens, the tax-free death benefit
is used to repay the loan and any remaining death benefit
is available for the company to use.
The benefits
are clear: it provides businesses liquidity, tax-deferred
benefits and insurance protection.
Transfer
of Family Business
Similar to the above example, a life policy purchased by the
company could be a part of succession planning. If a family
owns and operates a viable business, succession planning should
not only consider who should take over running the business
but how the ownership of that company will be divided. For
example, a business owner may decide to give only one of his/her
children an executive position and/or ownership in the company
after they die. However, the owner may still wish other family
members to receive financial benefits of ownership in the
business. In this case, the owner could purchase a life insurance
policy to provide funds for the successor to “buy-out”
the shares of the company from relatives without borrowing
or using his/her own funds. That way, the successor takes
control of the business and other family members receive money
for their share of the business.
For a
check list of things to consider while you’re estate
planning, click on the following link to Great West Life’s
website http://www.gwl.ca/gw-home/english/life/estate_checklist.html
Charitable
Giving
More and more, individuals bequeath large sums of money to
their preferred non-profit organizations. One way to secure
funds for a favourite charity is to purchase life insurance
and bequeath those funds to one or more charitable organizations.
This is one option to preserve the bulk of an estate for immediate
family, relatives and friends and give back to the community.
Because
there are always potential risks in any financial and insurance
investment, you should always consult your legal and accounting
advisors. To learn more about the available life insurance
products and how they fit your particular needs, contact Don
McGowan at (416) 805-9999.
[Back
to Top]
Insured
Annuities Are a Good Option for Retirement
There
are many financial choices to consider for retirement. An
insured annuity is one of them. It has two parts. First, there
is a life annuity which is a contract that provides for a
steady stream of equal payments during a person’s life
in exchange for a lump sum purchase price. And, secondly,
an insurance policy is purchased to secure the capital (lump
sum) that was invested in the annuity. The objective of the
annuity arrangement is to provide a better return on investment
than traditional fixed-rate investment vehicles, while preserving
the capital invested.
How
does it work?
An investor uses a sum of money to purchase the annuity in
return for a steady stream of income as long as they are alive.
Life insurance is also purchased which has a death benefit
equal to the capital invested in the annuity. Part of the
money from the annuity is used to pay for the life insurance
premiums. In the case of death, the annuity typically stops
payment (depending on the terms and conditions) and the life
insurance death benefit is paid to the estate. Therefore,
the capital is preserved for loved ones.
This is
only a basic overview of the insured annuity. Other types
of annuities can also be considered. For full details on all
the options and the risks associated with insured annuities,
contact Don McGowan at (416) 805-9999 or McGowan@bellnet.ca.
[Back
to Top]
Health
Services no longer covered by Ontario
As a reminder,
the following changes were announced in Ontario’s spring
budget.
- Eye
Exams – effective November 1, 2004 the provincial
health plan no longer covers the cost of routine eye exams.
The only exception is for seniors age 65 and over and those
under the age of 20.
- Chiropractic
– effective Nov. 30, 2004, Ontario will no longer
pay for chiropractic services.
- Physiotherapy
– As of March 31, 2005, the province will no longer
cover the cost of physiotherapy. The only exception is that
seniors will continue to receive physiotherapy through home
care, long-term care facilities and hospitals.
Contact
Don McGowan at (416) 805-9999 to discuss your employee benefit
plan and possible amendments in response to these changes.
Disclaimer:
The opinions and advice in this e-News Bulletin are provided
for the general guidance and benefit of McGowan Insurance
Services Ltd. customers based on information we believe to
be accurate. We cannot guarantee its accuracy or completeness
for individual circumstances. While we strive to provide reliable,
informative material herein, we cannot account for all industry
conditions and legislative changes that occur. |
