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  • Jeremy Stankov

Business Owners - Make Better Use of Your Business Assets and Save Taxes

Own a business?

Why don’t we make better use of your cash and bolster your balance sheet with cash that is accessible when you need it, keep it safe, grow it and buy you life insurance?

We know business owners need a lot of insurance long-term. But their priority is growing the business.So, why not use the assets you already have in the business, but make much better use of them?

Let’s look at a quick example - If our business owner were to die today, let’s assume there would be a capital gain on his estate of more than $5,000,000.That would be taxable at 50% (inclusion rate).

And the estate would pay taxes of about 50%.Our business owner’s estate’s tax bill today would be about $1,250,000 and growing.

But, let’s say they live another 40 years.

What would be the future tax bill?

Well, that’s tough to figure out.

But, if we grow the value at only 3% per year for 40 years, that brings the tax bill up to nearly $5,000,000 - or even higher.

So, what happens?

Well, there are several options:

1. If our business owner dies tomorrow and wants to keep those assets in the family, someone needs to find more than $1M in cash to pay that bill. They should buy a term policy to cover off that risk.

2. But, that doesn’t account for future growth. So, they may need more. How much more? No one really knows. But, if their business grows at only 3% per year, they’ll need about $5,000,000 in insurance by the time they die. And it could be much higher.  We should look at participating life insurance strategies so they can keep more of their money and grow their money in tax advantaged assets to cover the tax bill.

3. There are also strategies to stop a lot of that growth or reallocate assets. Things like estate freezes and trusts to minimize the impact and Individual Pension Plan strategies to shelter more of your money from taxes.

So, why not use the assets you already have in the business, but make much better use of them?

If you’re interested in talking and learning more, book your FREE consultation and we'll be happy to chat.

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