Life Insurance - Uses, Tips And Traps

Life insurance is a familiar product to many of us and can be an element of estate planning that should not be overlooked. It is typically used to either create or preserve wealth and can be used in a variety of ways in structuring an estate plan. For example:

Creating Liquidity to Pay Debts -

When completing your estate plan, an analysis should be done of the nature and extent of anticipated debt and expenses upon death. In Canada, upon death we are notionally deemed to have disposed of all our assets for tax purposes. This means that any unrealized capital gains at the time of death will be taxed. This can often result in a significant tax bill - family cottages often being a prime example. Life insurance can create the necessary liquidity so that assets do not need to be sold in order to pay associated tax debt or any other forms of debt.