Article 2
Repaying the IFA Loan
The outstanding loan can be repaid in several ways. Both individuals and business owners can gradually repay the loan as their income grows and cash flow increases. Another option is to repay the loan when the insurance policy’s death benefit is paid out (upon the passing of the insured individual), with any remaining proceeds distributed to the beneficiaries.
Within certain limits, the cash value that accumulates within the policy is subject to income tax only upon withdrawal. As with any insurance policy, as long as premiums continue to be paid, the policy remains in force.
If you reinvest the loan proceeds back into your business or investment portfolio and are taxed at the highest marginal rate, you can claim a deduction on your tax return for a portion of that interest.
A corporate IFA can also enhance the size of your company’s Capital Dividend Account, which tracks specific tax-free surpluses accrued by a private corporation. These surpluses can be distributed as tax-free capital dividends to the corporation’s shareholders.
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