PI Financial Services

Corporate Insured Annuities

 

The Corporate Insured Annuity strategy is designed for an owner of a Canadian Controlled Private Corporation (CCPC) that has considerable conservative, liquid investments, such as GICs, term deposits, bonds, and bank accounts. The company is paying this interest income to you in the form of a taxable dividend, which you are using to supplement your income. You want to both maximize the income you are receiving today, while preserving your capital investment.

To start, the company would liquidate these investments to purchase both an annuity contract (non-prescribed) and an exempt life insurance policy with you as the life insured and the corporation as the owner and beneficiary. The annuity would generate a payment stream that would pay the life insurance premiums and the tax on the annuity. The remaining amount is used to supplement your retirement income. Since a prescribed annuity yields a higher return than many traditional fixed-rate investments, and it has a preferred tax treatment, this results in a higher after-tax return. This rate of return is guaranteed for life.

When you die, your company receives the tax-free death benefit from the life insurance policy. The insurance proceeds in excess of the Adjusted Cost Basis is credited to the company's Capital Dividend Account, allowing the company to pay out a sizeable tax-free dividend to your heirs/estate. This is a very effective strategy to allow money to flow out of the company with little or no tax, significantly enhancing your net estate value at death.

Who It Works For:

  • You are age 60-75 and in good health.
  • You are an owner of a Canadian Controlled Private Corporation.
  • You have sizeable non-registered liquid investments (preferably GICs, bonds, bank account) inside of this corporation.
  • You are risk adverse, but looking for greater after-tax cash flow for retirement.
  • You want to retain your capital investment to leave to your family or a charity.
  • You are receptive to long-term planning strategies.