Planning your client s future

Transcription

1 Planning your client s future Using insurance for your client s corporate planning needs TAX, RETIREMENT & ESTATE PLANNING SERVICES This information is for advisor use only. It is not intended for clients.

2 Manulife s Tax, Retirement & Estate Planning Services Your clients deserve to get the maximum benefit from Manulife s sophisticated insurance-based wealth accumulation products. That s why we offer you the advantage of a nation-wide team of skilled, knowledgeable tax professionals in the fields of law, insurance and accounting our Tax, Retirement & Estate Planning Services. We ve created this reference chart to help you consider for your client s corporate planning needs. Visit our website for a list of products these sales concepts support. 2

3 Customize the strategy to meet your client s needs Concept Sales Opportunity Strategy Benefits Client Profile Buy-Sell Plan for the buyout of a private shareholder at death Project fair market value of shares and compare cost of life insurance to other methods of funding the buy-out Shareholders of a private are insured under a life insurance policy Policy proceeds are used to fund the buy-out at death Funds available exactly when needed Insurance proceeds received tax free Flexible structure: Promissory note Redemption Criss-cross If corporate owned: Premiums paid with cheaper after-tax dollars Shareholders of a private willing to plan for future funding need today Desire to ensure smooth transition of business at death Want to implement shareholders agreement with buy-sell provisions Buy Term Invest the Difference Corporate Quantify the benefits of permanent life insurance owned by a private Compare the estate benefits of a corporate owned permanent life insurance policy to buying term and investing the difference in a taxable investment Corporation purchases and overfunds a life insurance policy Increase size of estate where estate is named as beneficiary Permanent coverage Reduces current tax payable by Access to cash values who needs permanent life insurance protection Corporation has funds available to overfund a life insurance policy or to invest Corporate Estate Bond Increase size of estate using permanent life insurance owned by a private Compare the estate benefits of a corporate owned permanent life insurance policy to a taxable investment Corporation uses surplus cash, currently invested in taxable investments, to fund or overfund a life insurance policy Provides life insurance protection Increases the size of the estate where proceeds received by the are distributed to the deceased shareholder s estate Reduces current tax payable by who has strong desire to leave a legacy at death Age 45 and older Corporation has funds available to invest Corporate Estate Bond Annuity Funded A single-deposit insurance solution to increase size of estate using permanent life insurance owned by a private Compare estate benefits from an annuity-funded corporate owned life insurance policy to a taxable investment Corporation uses surplus cash, currently invested in taxable investments, to fund a non-prescribed annuity Annuity provides a stream of payments for life After tax amount of each payment funds a corporate owned life insurance policy Provides a single-deposit insurance solution Annuity payments fully guaranteed Plus all the benefits listed in Corporate Estate Bond who has a strong desire to leave a legacy at death Gratified by immediate completion of planning strategy Prefers locked-in planning Age 65 and older Corporation with liquid investments (to purchase annuity) 3

4 Concept Sales Opportunity Strategy Benefits Client Profile Corporate Insured Annuity Increase cash flow and preserve capital at death Compare cash flows and estate benefits from an annuity-funded corporate owned life insurance policy to a taxable investment Corporation uses surplus cash, currently invested in taxable investments, to fund a non-prescribed annuity Corporation purchases a life insurance policy to replace capital Annuity provides a stream of payments for life After tax amount of each payment funds the life insurance policy Remaining balance of annuity payments supplements corporate income Increase corporate cash flow Annuity payments fully guaranteed At death, life insurance proceeds replace capital for Can be a fully guaranteed solution who has a strong desire to leave a legacy at death Gratified by immediate completion of planning Prefers locked-in planning Age 65 and older Corporation with liquid investments (to purchase annuity) Corporate Insured Retirement Program (CIRP) Supplement shareholder s cash flow at and provide estate benefits Compare cash flows at and estate benefits of a corporate owned overfunded permanent life insurance policy to a taxable investment Corporation overfunds a life insurance policy to create cash values by Assign policy as collateral for bank loan Corporation or shareholder borrows funds to supplement income At death, insurance proceeds repay debt and excess is paid to the Provides life insurance protection Borrowed funds received tax free Loan interest may be deductible Interest may be added to loan balance Loan repayment deferred until death Timing and amount of loans are flexible Flexible loan structure corporate or shareholder borrowing Established lending relationship with Manulife Bank who needs life insurance protection Has maximized other taxsheltered vehicles (RRSP, RPP, TFSA, etc.) Wants to supplement shareholder s cash flow at Not averse to leverage Ages 30 to 55 Corporation with funds available to invest Immediate Finance Arrangement (IFA) Corporate Provide estate benefits while leverages to invest Show how cash values of corporate owned life insurance can be used to secure an investment leverage strategy, preserve cash flow and provide estate benefits Corporation maximum funds a tax-exempt life insurance policy to create significant, immediate cash values Assign policy as collateral for bank loan Borrow funds to invest in a business or property to produce income At death, insurance proceeds repay debt and excess is paid to Provides life insurance protection and preserves cash flow for investment Loan interest and insurance premiums may be deductible Loan repayment deferred until death Timing and amount of loans are flexible Borrowed funds received tax free Established lending relationship with Manulife Bank who needs life insurance protection Not averse to leverage Receptive to long-term planning and investment If required, has additional liquid assets available to secure debt Corporation has steady cash flow Corporation has sufficient taxable income to use deductions Income tax at high corporate rate 4

5 Concept Sales Opportunity Strategy Benefits Client Profile Income Loss Replacement Plan (ILRP) Enhance disability benefits to a particular group(s) of employees Compare the benefit and cost of corporate owned grouped disability insurance policies to individually owned policies Identify a group of employees as a separate class eligible for enhanced benefits Corporation pays premiums under individual disability insurance policies to cover all group members Disability benefits paid direct to employees (taxable) Corporation deducts premiums Premiums not taxable as employee benefit Higher after-tax benefit than individually paid policies Helps retain key employees Shareholder employee may be part of group Flexible planning options top-up or carve out Flexible ownership, health and welfare trust, employee life and health trust (ELHT), or employee owned who needs life insurance protection Not averse to leverage Receptive to long-term planning and investment If required, has additional liquid assets available to secure debt Corporation has steady cash flow Corporation has sufficient taxable income to use deductions Income tax at high corporate rate Living Buy-Out Corporate Plan for the orderly buy-out of a shareholder at Compare cost of life insurance to a taxable investment to fund the buy-out of a shareholder at Corporation overfunds a life insurance policy(ies) on a shareholder to create cash values by Assign policy as collateral for bank loan Corporation borrows to fund the buy-out At death, insurance proceeds repay debt and excess is paid to the Borrowed funds received tax free Loan interest may be deductible Interest may be added to loan balance Loan repayment deferred until death Established lending relationship with Manulife Bank Premiums paid with cheaper corporate after-tax dollars Life insurance can fund buy-out on premature death Shareholders of a private willing to plan for future funding need today Desire to ensure smooth transition of business at Want to implement shareholders agreement with buy-out provisions at Majority of shareholders under age 50 Corporation with funds available to invest Living Buy-Out Partnership Plan for the orderly buy-out of a partner at Compare cost of life insurance to a taxable investment to fund the buy-out of a partner at Partnership overfunds a life insurance policy(ies) on partners to create cash values by Assign policy as collateral for bank loan Partnership borrows to fund the buy-out At death, insurance proceeds repay debt and excess is paid to partnership Borrowed funds received tax free Loan interest may be deductible Interest may be added to loan balance Loan repayment deferred until death Established lending relationship with Manulife Bank Life insurance can fund buy-out on premature death Partners willing to plan for future funding need today Desire to ensure smooth transition of business at Want to implement partnership agreement with buy-out provisions at Majority of partners under age 50 Partnership with funds available to invest 5

6 Concept Sales Opportunity Strategy Benefits Client Profile Retirement Compensation Arrangement (RCA) Supplement income for key employees or senior executives Show how life insurance can be used as a costeffective funding vehicle for an RCA Employer establishes an RCA RCA overfunds a life insurance policy Cash value is accessed to provide promised RCA benefits to employee (taxable) (no 50% refundable tax) Contributions to RCA are deductible No current income inclusion to employee(s) Segregates RCA investment assets from employer Funded obligation provides peace of mind to employee(s) Helps retain key employees Access to cash value through policy withdrawal or collateral loan Split dollar structures available May provide tax benefits if moving offshore Employer interested in providing supplemental income to key employees or senior executives Willing to fund future obligation today Employer has surplus funds to invest in RCA Employee(s) age 50 or younger Split Dollar (Life Insurance) Creative life insurance solution to provide for the financial needs of two parties Show how costs and benefits of a jointly owned life insurance policy can be allocated between two parties Two parties enter into a formal split dollar agreement Parties jointly purchase a life insurance policy One party pays for and owns the level death benefit and the other party pays for and owns the cash value Provides life insurance protection for one party Provides a tax-sheltered investment for another party Flexibility to determine split of benefits Flexible method to determine costs payable by each party Benefits payable at death received tax free Proceeds received by may generate credit to Capital Dividend Account Two parties that are associated, one with a need for capital at death and the other with funds available to invest Parties to the split dollar agreement may include: Corporation/shareholder Corporation/employee Corporation/RCA trust Parties willing to jointly administer their split dollar agreement Split Dollar (Critical Illness Insurance) Creative critical illness insurance solution Show how costs and benefits of a jointly owned critical illness policy can be allocated between a shareholder and their private Shareholder and enter into formal split dollar agreement Shareholder and jointly purchase a critical illness insurance policy Corporation pays for the level critical illness insurance benefit and the shareholder pays for the return of premium rider At time of claim receives insurance benefit - return of premium rider terminates. If return of premium rider is exercised shareholder receives benefit - insurance coverage terminates. Provides critical illness protection or return of premium benefit to shareholder and their private Flexibility to determine split of premium Flexible method to determine costs payable by each party Benefit payable at time of claim received tax free who needs critical illness insurance Shareholder willing to administer the split dollar agreement Shareholder understands only one party will benefit under the strategy Shareholder understands tax issues may apply if the return of premium rider is exercised Shareholder willing to seek professional 6

7 Strategies at a glance Primary Concerns Corporate Increase size of estate Wealth transfer Business continuation Retirement income planning Tax payable at death Asset diversification Illness/sickness/disability Leaving a legacy Tax-efficient investing Cash for personal needs (i.e., education) Cash flow constraints Employee benefits Buy-Sell Buy Term Invest the Difference - Corporate Corporate Estate Bond *Corporate Estate Bond - Annuity Funded Corporate Insured Annuity Corporate Insured Retirement Program (CIRP) *Immediate Finance Arrangement (IFA) - Corporate Income Loss Replacement Plan (ILRP) *Living Buy-Out - Corporate *Living Buy-Out - Partnership *Retirement Compensation Arrangement (RCA) *Split Dollar - Critical Illness Split Dollar - Life Insurance *Custom Solutions - Contact your Manulife Wholesaler for support 7

8 The concepts are offered through Manulife Financial (The Manufacturers Life Insurance Company). This document is protected by copyright. Reproduction is prohibited without Manulife s written permission. Manulife, Manulife Insurance, the Block Design, the Four Cube Design, and Strong Reliable Trustworthy Forward-thinking are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under licence. MK2260E 09/2015