Jayson Lowe shows how business owners can use dividend-paying whole life insurance to avoid double taxation and shelter capital. The strategy creates death benefits that credit a capital dividend account, letting heirs access funds tax-free. He also covers catastrophe plans for exits like retirement, sale, disability, or death.
How do we avoid double taxation?
Boy, how do you avoid double taxation? I think, you know, most people would also be wise to discover how to mitigate singular taxation. Boy, we bring up double tax traps and people want to spontaneously self combust, especially business owners. But an example of a double tax trap, well, think about it from this perspective. It's even worse. Like you're taxed personally. As a business owner, you are potentially triggering capital gains tax. You're potentially facing passive investment, income tax, estate tax, dividend tax. So the list just gets, keeps getting bigger because the government's constantly hovering over your assets with a giant knife and fork, just waiting to devour them. So how do you avoid that and do that? By playing by the rules and doing it completely legally and and inbounds. You have to investigate whether it's personally owned dividend paying whole life insurance or corporately owned dividend paying whole life insurance. When you have capital residing there and then you need to get money personally or you need to get money out of the corporation into your hands, you can do that in a way where you avoid the double tax trap. Let me give you one quick scenario. You have an owner of a company, the owner of a company has been taking out capital in the form of a wage, taxable dividends, or both. Business owner, heaven forbid, the unthinkable happens. Business owner dies, the shares roll over to the surviving heirs of the company, they can't get money out of the business without triggering tax. And the estate's got to deal with the value of that deceased's person's ownership interest in that company. Whereas when you introduce the dividend paying whole life insurance contract, the corporation in this case receives death benefit proceeds. That gives rise to the capital dividend account. The surviving heirs or shareholders can get that value out of the company in the form of tax free capital dividends. So let's tap into simple logic. I can either deal with things while I'm alive in a fully taxable or a tax advantaged way. And I can deal with things in terms of my final affairs in such a way where my surviving shareholders can deal with fully taxable or never taxable. Which one do you think is worth exploring?
So you're saying that Ascendant Financial may be able to provide some advice on a solution?
Yeah, not only advice, but a path forward, a way to structure things properly. And these are exemptions that exist within the tax code. And with dividend paying whole life insurance contracts, it's the greatest exemption that exists within the Canadian and American tax codes. Today. There's no greater exemption. So how much less do you want to take advantage of that exemption? If you're not doing this, you're not taking advantage of any of that available exemption. And if you're a responsible individual and business owner, which it would trust that you are, you want to take full advantage of the exemption that's made available, there's absolutely no disadvantage to taking full value of the exemption. There's a reason why the government encourages people to donate money to charities. The government ain't got no damn money to do that. So if the government recognizes that these life insurance contracts have a death benefit associated with them and that death benefit has merit, the surviving family is not going to rely upon social based programs to have their financial needs met. And that gave rise to all of the living benefit exemptions within these contracts that these business owners and individuals can take full advantage of and create a peaceful, stress free way of life while they're alive. It's remarkable. And so if you can think of any disadvantage to investigating that, I'd love to hear it.
It sounds to me that there's. Oh, that is good. Advantages while you're living and advantages, unfortunately. God forbid, when you pass away.
Well, hey, you know what One of my late mentors, he often said, I wish that everyone could pass away once for a week and see the problems that they leave behind. Whenever we meet with a business owner, one of the questions we ask is, what is your catastrophe plan? And we always get here, I'll show you the look that we get. Hold on, let me do this. This is the look that we get.
What is your catastrophe plan or what? You're going to exit the business in one of a few different methods. You're either going to retire, sell it, become permanently disabled, experience a critical illness, experience some form of marital breakdown or financial insolvency, God forbid, possibility, you could disappear. Do you have a plan in place to address all of those? The answer is always no. So you need a catastrophe plan in place. And that catastrophe plan has to ensure that not if, but when you're gone, that the business can carry on the business contacts, the business employees, the contracts. The business can still operate. Whereas when you have not addressed any of that, you die. Tomorrow. Nobody knows where to look, where to find it, who to talk to. They can't get access to any of the money, they can't get access to the assets, they can't get access to anything. They're scrambling. Whereas if you have a proper plan in place and you have the right tool to address the financial needs, and you can create a guaranteed purchase price for the business, and your surviving family can continue to rely upon the very same business for its financial resources. Then you owe it to yourself to investigate that. Get connected with the right person on my team, and we'll help you get that catastrophe plan in place.
