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Life Insurance and the Capital Dividend Account

Many business owners are unaware that corporate owned life insurance combined with the Capital Dividend Account (CDA) provides an opportunity to distribute corporate surplus on the death of a shareholder to the surviving shareholders or family members tax-free.

Income earned by a corporation and then distributed to a shareholder is subject to tax integration which results in the total tax paid between the two being approximately the same as if the shareholder earned the income directly. Integration also means that if a corporation is in receipt of funds which it received tax-free, then those funds should be tax free when distributed to the shareholder.

The Capital Dividend Account is a notional account which tracks these particular tax-free amounts accumulated by the corporation. It is not shown in accounting records or financial statements of the corporation.  If there is a balance in the CDA it may be shown in the notes section of the financial statements for information purposes only.

Generally, the tax-free amounts referred to, are the non-taxable portions of capital gains received by the corporation and the death benefit proceeds of life insurance policies where the corporation is the beneficiary. Read more

The Duties of an Executor

An executor is an individual or institution that is named in a will whose duty is to distribute estate assets according to the testator’s wishes. Acting as an executor can be stressful and time consuming so it is a good idea for a testator to make his or her choice wisely, and for someone who is asked to be an executor to investigate and review exactly what the job entails.  Often the executor is the spouse of the deceased. That tends to make the role somewhat more straightforward than it would be for a family member, friend or other acquaintance. In any event, this article covers the duties and obligations of an executor.

Arranging the funeral 

In addition to arranging the burial or cremation and funeral services according to the deceased’s wishes the executor would be responsible in ensuring that family, friends and interested parties (especially employer) have been notified about the death.  Family members will most likely assist in this including the posting of the obituary. If there are sufficient funds in the bank account of the deceased the bank will usually release  funds to cover the cost of the funeral. Read more

Debt Is a Four-Letter Word

Debt today is so common, you might say it can’t be avoided. Most people are not in a position to purchase a house or car for cash, while those who can buy such things outright may prefer to finance and keep control of their capital.

The truth is, while most of us see debt as a bad thing, any money borrowed to generate income or increase net worth can be considered “good debt.”

If the amount borrowed is invested for an overall gain, the debt is a tool. Borrowing to further your education, for example, is good debt since an education generally increases the likelihood you will earn more in the future. Most often, too, the interest paid on this type of debt is tax deductible. Read more

Thinking of Cancelling Your Life Insurance?

Have you found yourself wondering if you really need that life insurance policy you pay for every month?  You are not alone.

As time goes on we often forget the reasons behind purchasing the amount and type of coverage we did. For this reason it is advisable to have regular reviews to make sure you are adequately protected.

Perhaps you are having trouble making ends meet and are looking to trim expenses.  Maybe you simply don’t think you need it because the kids are getting older and your obligations to them have diminished.  Some may feel that they have enough assets accumulated that insurance is no longer necessary and even a waste of money.  Before you make the decision to cancel your life insurance policy, consider these compelling reasons to keep it. Read more

What the Wealthy Know about Life Insurance

If you have ever thought that life insurance was something you wouldn’t need after you reached a certain level of financial security, you might be interested in knowing why many wealthy individuals still carry large amounts of insurance.  Consider the following:

  • A life insurance advisor in California recently placed a $201 million dollar life insurance policy on the life of a tech industry billionaire;
  • Well known music executive David Geffen was life insured for $100 million;
  • Malcolm Forbes, owner of Forbes Magazine, was insured at the time of his death in 1990 for $70 million.

While life insurance is most often looked upon as a vehicle to protect ones family or business, the question that springs to mind is why would individuals with wealth need life insurance?  Read more

ARTICLES OF INTEREST

11
Jun

What Non-Retirees Mean for the Workforce

The decision of 72-year-old railway executive Hunter Harrison to pursue a challenging new gig instead of retirement is emblematic of the changing shape of the workforce

For all Hunter Harrison’s unquestionable talents, he is really bad at one thing: not working. The celebrated railway executive officially retired from Canadian National Railway Company (CN) in 2009, after a long career running railways. A little more than two years later, at the encouragement of activist investor Bill Ackman, Harrison came out of retirement to become president and CEO of Canadian Pacific Railway (CP). Read more »

14
May

Debt Load

Are you out of your debt comfort zone? Does it seem as though you’re paying too much to bill collectors and not enough for savings and the things you enjoy in life? If so, it’s a good idea to figure out just how much debt you have and compare that to how much you earn. This will give you clear understanding of your financial health.

Debt Load

Debt load is a term that is used to describe a consumer’s amount of debt. It is often used to understand if you are carrying a “safe” amount of debt. Creditors look at a debt/income ratio, comparing your income with your debts to analyze whether you have an appropriate amount of debt. The debt/income ratio is figured monthly and reveals either how good — or bad — your financial situation is. Read more »