4- Life insurance

Life insurance is a fundamental estate planning tool. Tax-exempt amounts received at the time of the beneficiary’s death can be used to replace lost income from the deceased, facilitate tax payments and other liabilities resulting from the death and ensure, where applicable, the required funds to pay the bequests and donations to charitable organizations provided in the deceased’s will.

In the case of an estate freeze, including life insurance products can ensure the necessary financing pursuant to the shareholder agreement clauses relating to share transfers on death. It also has to be determined whether the insurance beneficiaries should be the shareholders or the company. The decision may depend on a number of factors, such as the difference in the partners’ ages, how difficult it is for some of them to obtain medical certificates or the beneficiaries’ financial capacity.

If a company receives non-taxable insurance proceeds on the death of a shareholder, substantially all of the proceeds can be distributed tax-free to the shareholders by electing to pay out a capital dividend (see Section VI). However, the premiums for such insurance are generally non-deductible.

Life insurance is still an easy way to ensure the estate plan previously discussed is easily put in place while ensuring the deceased’s objectives are achieved. As taxpayers’ insurance needs are constantly evolving, it is important to review the coverage on a regular basis.