Life Insurance as a Source for Estate Relief

Ryan Smillie

January 9, 2019

Everyone has heard the saying “there are only two certainties in life, death and taxes.” When we pass away most of our accumulated wealth is subject to income tax, probate tax or both.

There are some simple things we can do to reduce this inevitable tax bill on our estates:

• own certain non-registered assets jointly with a spouse or a child
• ensure the beneficiaries of our RRSP and RRIF accounts are our spouses

However, some taxes and expense are unavoidable when we pass away.

By putting a permanent insurance policy in place, your beneficiaries will have an influx of cash to relieve their financial stress at an already stressful time. A life insurance policy can pay for funeral costs and other final expenses. It can take some of the tax burden away from your estate as well as ensure your legacy wishes are met – such as paying for a child’s/grandchild’s education.

Major Expenses at Death:

• Funeral costs
• 1.5% probate fees on estate assets over $50,000
• Taxes on RRSP, RRIF, LIRA, LIF account disposition
• Taxes on the sale of non-registered investment assets with capital gains
• Taxes on deemed disposition of secondary real-estate assets