We All Want To Reduce Taxes – Immediate Finance Arrangement Strategy


Family businesses, high net worth individuals and professionals require distinctive succession and estate planning and this is in greater demand than ever before.  However, it is not getting done!  Furthermore, in the past 10 years, corporate income splitting and non-active business income restrictions have been imposed resulting in more taxes.  Personal tax rates have increased from 46.41% to 53.53%* and dividend tax rates have also increased from 31.34% to 47.74%*.

So why plan?  Some top motivations are to protect your estate value, reduce corporate investment taxes and preserve your small business deduction, maintain your personal or corporate cash flow and possibly donate more to your favourite charitable organization without affecting your estate value.


You are a high-income earner in the top marginal tax bracket of 53.53%, with a need for permanent life insurance.  You have significant corporate and personal assets in taxable investments.  You want to protect the value of your estate, reduce taxation on investment growth, and possibly make a sizeable donation to your favourite charitable organization without adversely affecting cash flow nor affecting your capacity to purchase investments. 


The immediate finance arrangement offers advantages that may assist you with cash accessibility while maintaining your financial interests and providing valuable life insurance protection.

You purchase a permanent tax-exempt life insurance policy inside the desired corporation or personally.  You make payments into the policy to create cash values and then collaterally assign the policy in exchange for a loan up to the amount of the annual deposits.  The loan proceeds may be reinvested to produce income from a business or property.  If the loan proceeds are reinvested, the interest paid on the loan and all or a portion of the insurance costs may be tax deductible.  You must ensure the loan and the collateral assignment of the life insurance policy meet all requirements for deductibility under the Income Tax Act.

The investment account may be used to pay off the loan at death.  The death benefit will grow over time due to the paid-up additional insurance option.  The death benefit is payable tax-free to the beneficiary corporation or personal beneficiary.  If you choose to donate a predetermined portion to your favourite charity the proceeds will be paid to the charity by a direction in the will and deemed to have been made by the deceased’s estate (the GRE if the estate qualifies as one), and not the deceased.  The tax receipt issued for 100% of the donation by the charity will qualify for a tax credit that can be used in your final tax return. This credit can eliminate all or a portion of the tax liability at death and the value of the estate may be totally preserved.


  • Minimize corporate investment and estate taxes while living and at death.
  • Preserve your estate value allowing more opportunity for the unexpected.
  • All this accomplished without adversely affecting your lifestyle and current investment plans.
  • Possibly make a much more impactful donation to your favourite charitable organization.

The use of life insurance in the context of estate preservation and charitable gifting at death will appeal to those individuals who want to reduce or eliminate taxes at death and/or have a strong desire to make a larger bequest to one or more charities.  This opportunity in combination with the immediate finance arrangement will allow you to greatly improve your investment and charitable planning with a much-reduced net cash outlay and should be considered in the bigger context of estate planning and planned giving options that are available both during his or her lifetime and at death.

Everybody’s situation is different and unique and ultimately our goal is to ensure that all areas of your planning are looked after, help you make sound decisions and ensure that you are made aware of your options in these areas.  If this sounds of interest, please contact Michael or Adam Prittie at 613-728-0101.

Written By: Shawn Ryan, Estate & Insurance Specialist

Source: * https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html

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