How the Corporate Estate Bond Works
Your company is an operating company or an investment holding company. It has retained profits or surplus cash that is not paid to you, since you do not need the income. Your corporation invests the cash in GIC's or other taxable investments, which you earmark for your heirs or favourite charity. You want a financial planning strategy that will increase the funds available when you die.
This financial planning strategy requires your corporation to use its surplus cash to purchase a life insurance policy. By replacing the taxable investments with a life insurance policy, you will increase the funds available to your heirs when you die, reduce the amount of current and future tax your corporation pays, and create a mechanism to move funds out of your corporation tax-free when you die.
Your corporation purchases a life insurance policy on your life and is the beneficiary of the policy. The corporation deposits funds into the policy in excess of what is needed to pay the policy charges, creating cash value. This cash value accumulates on a tax-deferred basis, increasing the death benefit payable under the policy.
When you die, your corporation receives the proceeds of the policy, tax-free. The corporation receives a credit to its capital dividend account for the amount of the life insurance proceeds, less the insurance policy's adjusted cost basis. Dividends can then be paid - tax-free - to your estate out of the capital dividend account.
By taking advantage of the Corporate Estate Bond, you have moved corporate investment dollars from a tax-exposed environment to a tax-sheltered environment, increasing the amount you give to your heirs or favourite charity when you die.
Male age 50, Non-smoker, $1,000,000 Face Amount, Transamerica AEGON different interest options Universal Life Policy
| Year | Age | Premium | Assumed Rate of Return | Total Rate of Return | Fund Value | Annual Charges | Side Account Balance | Cash Value | Death Benefit |
|---|---|---|---|---|---|---|---|---|---|
| 1 | 51 | $68,764 | 5.00% | 6.25% | $67,892 | $4,149 | $0 | $34,892 | $1,067,892 |
| 2 | 52 | $68,764 | 5.00% | 6.25% | $139,434 | $4,525 | $0 | $89,434 | $1,139,434 |
| 3 | 53 | $68,764 | 5.00% | 6.25% | $214,884 | $4,939 | $0 | $139,884 | $1,214,884 |
| 4 | 54 | $29,661 | 5.00% | 6.25% | $252,061 | $5,388 | $0 | $177,061 | $1,252,061 |
| 5 | 55 | $29,661 | 5.00% | 6.25% | $290,575 | $5,884 | $57,848 | $232,727 | $1,305,693 |
| 6 | 56 | $29,661 | 5.00% | 6.25% | $330,515 | $6,436 | $61,966 | $268,549 | $1,362,133 |
| 7 | 57 | $29,661 | 5.00% | 6.25% | $371,993 | $7,044 | $66,337 | $305,656 | $1,420,310 |
| 8 | 58 | $56,414 | 5.00% | 6.25% | $440,984 | $7,708 | $70,974 | $370,010 | $1,505,982 |
| 9 | 59 | $56,414 | 5.00% | 6.25% | $511,534 | $8,457 | $75,893 | $435,641 | $1,594,196 |
| 10 | 60 | $56,414 | 5.00% | 6.25% | $584,543 | $9,297 | $55,175 | $529,368 | $1,639,718 |
| 15 | 65 | $0 | 5.00% | 6.25% | $751,437 | $14,453 | $0 | $751,437 | $1,470,867 |
| 20 | 70 | $0 | 5.00% | 6.25% | $969,766 | $21,133 | $0 | $969,766 | $1,360,159 |
| 25 | 75 | $0 | 5.00% | 6.25% | $1,253,067 | $29,638 | $0 | $1,253,067 | $1,507,118 |
| 30 | 80 | $0 | 5.00% | 6.25% | $1,619,631 | $39,849 | $0 | $1,619,631 | $1,867,957 |
| 35 | 85 | $0 | 5.00% | 6.25% | $2,093,251 | $51,588 | $0 | $2,093,251 | $2,523,496 |
| 40 | 90 | $0 | 5.00% | 6.25% | $2,705,379 | $64,610 | $0 | $2,705,379 | $3,260,952 |
| 45 | 95 | $0 | 5.00% | 6.25% | $3,496,189 | $78,503 | $0 | $3,496,189 | $4,213,749 |
| 50 | 100 | $0 | 5.00% | 6.25% | $4,518,358 | $0 | $0 | $4,518,358 | $4,518,358 |
This projection is based on Transamerica Life Canada's current interest rates, insurance charges, and premium tax rates. Premium taxes may vary depending on the province where the policyowner resides. Interest rates, insurance charges, and premium tax rates are subject to change by Transamerica Life Canada.
The Index Interest Option is only available in Year 5 and later and only when it is declared by Transamerica Life Canada. The 5.0% Assumed Rate of Return is a weighted average of the Primary and Index Interest Options, where 75% of the funds are in the Primary Interest Option and 25% of the funds are in the Index Interest Option. The 6.25% Total Rate of Return is based on adding a 1.25% Bonus (25% of 5%) to the Assumed Rate of Return. Bonus interest is only credited in Year 11 and later when premiums have been paid in full as scheduled.
The cash values and death benefits shown are not guaranteed and will vary based on the actual interest rates credited, the insurance charges deducted, and the premium tax rates charged. Actual results may be more or less favourable than those shown.
This material is for information purposes only and should not be construed as providing legal or tax advice. Prospective investors should consult their own professional advisors as to the legal, tax, financial and any other considerations relevant to them in connection with this investment.