Skip to content

Posts from the ‘Whole Life’ Category

22
Aug

Optimizing Wealth Through Asset Re-Allocation

If you are an active investor, your investment holdings probably include many different asset classes.  For many investors, diversification is a very important part of the wealth accumulation process to help manage risk and reduce volatility.  Your investment portfolio might include stocks, bonds, equity funds, real estate and commodities.  All these investment assets share a common characteristic – their yield is exposed to tax.  From a taxation standpoint, investment assets fall into the following categories:

Tax Adverse

The income from these investments are taxed at the top rates.  They include bonds, certificates of deposits, savings accounts, rents etc.  Depending on the province, these investments may be taxed at rates of approximately 50% or more. (For example, Alberta 48.0%, BC 49.8%, Manitoba 50.4%, Ontario 53.53%, Nova Scotia 54.0%). Read more »

19
Mar

Whole Life: A Whole New Investment Class

 

The recent developments in investment markets and the poor performance that has resulted have brought about a new appeal to an old workhorse.  For investors looking for a diversification in their investment portfolio and a more tax efficient fixed income investment alternative, a compelling argument can be made for the use of Whole Life Insurance.

 

Whole Life is a permanent insurance contract with level lifetime guaranteed premiums and tax advantaged cash value growth.  If the contract also pays the policyholder annual dividends the Whole Life contract is referred to as participating.  These dividends can be taken in a number of different ways but the option most often selected to provide the maximum tax advantaged growth is “paid-up additions”.  Paid up additions are blocks of single premium life insurance which also pay an annual dividend so these blocks contribute to the building of both significant cash value and estate value (death benefit).  In a participating policy all policy owner premiums are pooled under a “participating account”.  From this pool certain expenses and taxes are deducted along with death benefits paid to beneficiaries.  In addition to the annual premiums of policyholders, investment gains and other income (such as policy loan interest) are credited to the participating pool.  The assets of the participating pool are professionally managed and largely in fixed income investments.  Management fees are extremely low (one company charges 0.072% management fee) and the funds have very little volatility.  This combination of guaranteed cash value and the non-guaranteed portion from the dividend account grows tax-deferred and, if paid to the beneficiary as a consequence of death, tax-free. 

Read more »