Capital Dividend Account

The Situation
You are a major shareholder of a Canadian controlled private corporation with considerable surplus capital locked inside the corporation. You have no personal need for these funds, but eventually want to have your heirs to have access to them. If the surplus capital is taken out the entire amount is subject to tax, and if it is left in the investment income generated will be taxed at the highest corporate tax rate.

The Strategy
Purchase a tax-exempt life insurance policy with your corporation as the owner and beneficiary. Transfer the surplus funds to the policy where they can grow tax-sheltered. Upon death, the benefit, less the adjusted cost base is credited to the corporation's Capital Dividend Account, which can then be paid out to your heirs.

This Capital Dividend Account Strategy provides:
· Tax-free capital dividend
· Tax-sheltered investment growth
· Multiple life coverage
· Substitute life provision
· Permanent life insurance protection
· Flexibility to change coverage amounts

This material is for information purposes only and should not be construed as legal or tax advice. Every effort has been made to ensure its accuracy, but errors and omissions are possible. Individual circumstances may vary and specific legal and tax advice is recommended.

This strategy is based on current tax legislation. Future tax changes and market conditions may affect this program.

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