Case Study 1

Wealth Preservation for a Successful Family Business

However, they were concerned about the significant portion of their annual business investment income that went toward taxes. Paying over 50% of their business investment income to the tax department limited the growth potential of their wealth and left them wanting to leave more for their family and less for taxes.

To address this challenge and optimize their wealth preservation strategy, John and Sarah sought a tailored solution that involved leveraging a corporate-owned life insurance (COLI) policy.

A portion of their business’s income was strategically allocated to purchase a tax-efficient COLI policy. This joint policy, with premiums payable for a specified period, provided them with a fully guaranteed return. The policy offered an attractive equivalent return of 11.5% upon their passing, safeguarding their wealth from market risks and interest rate fluctuations.

By implementing this insurance strategy, John and Sarah were able to achieve several significant benefits. Firstly, they were no longer burdened by giving up a substantial portion of their annual business investment income to the tax department. This allowed their wealth to grow at an accelerated rate, unimpaired by excessive taxation.

Upon the second passing of either spouse, the insurance proceeds would be received tax-free by their chosen beneficiaries. The company would then distribute the insurance proceeds to the beneficiaries without incurring additional taxation. This ensured that more of their hard-earned wealth would be preserved for their family’s future, allowing them to continue the legacy of the family business.

By implementing this comprehensive wealth preservation strategy, John and Sarah successfully minimized their tax obligations while maximizing the growth potential of their wealth. The COLI policy served as a powerful tool to protect their business assets and ensure a lasting legacy for their loved ones.