Protect your investments for those you love

Russ
Russ Oehmen
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There are many ways to leave a financial legacy: inheritances for loved ones, planned giving for charities, investments, or well-established businesses are some examples.

Oh, and don't forget the federal tax department.

Granted, few of us include the national treasury in our last wills and testaments; even fewer of us consider the tax collector as a person to whom we want to leave a portion of our estate, unless a dear relative or friend also happens to work at the tax department, and that's a whole other issue.

For your benefit - There are many ways to leave a financial legacy: inheritances for loved ones, planned giving for charities, investments, or well-established businesses are some examples.

Oh, and don't forget the federal tax department.

Granted, few of us include the national treasury in our last wills and testaments; even fewer of us consider the tax collector as a person to whom we want to leave a portion of our estate, unless a dear relative or friend also happens to work at the tax department, and that's a whole other issue.

However, our country's taxation laws are clear. Death provides no escape from income tax collection. If you are not alive to remit the tax personally, your executor or other official in charge of your affairs must do so on behalf of your estate. Without good planning for how taxation laws can affect your income and investments upon your death, a healthy amount of the money you had saved for your beneficiaries may end up going to the tax collector instead.

Every financial situation is different, so it is essential you receive guidance from your financial adviser for details specific to your portfolio. Generally speaking, any investments you hold at the time of your death are subject to taxation at the time of transfer - when your registered retirement savings, your LIF or RRIF are transferred to your children, for example, the entire amount of those investments is considered taxable income. Depending on the size of the investment and income levels, a sizeable chunk could end up being remitted as taxes rather than going to your children as you had planned.

An estate bond is a financial product that can shelter your investment for your chosen beneficiary.

An estate bond sets up an annuity, a life insurance product which you purchase by paying regular premiums on your life insurance policy. Upon your death, the life insurance settlement goes tax-free to the preferred beneficiary you have named on the policy. The key difference here is the taxation: the estate bond is not considered taxable income when paid to the beneficiary.

Purchasing an estate bond is the same as purchasing other life insurance products. Premium costs vary with the amount of the policy and with your health and age: the younger and healthier you are, the lower your premium. Joint life policies are available for a range of budgets; even a small monthly premium can leave a nicely-sheltered nest egg for your loved ones or chosen charity.

If you are just entering the workforce, or are in the midst of raising a young family, an estate bond is also worth considering. With age and health on your side, a small premium could start a sizeable nest egg that is there, tax-exempt, for your loved ones upon your death. If you are retired or nearing retirement, an estate bond is a good product in which to invest any additional dollars you may want to put aside for your loved ones or a charity; premiums are paid with the annuity and taxation is minimized.

Life insurance is for the living, and as someone who has worked hard to support a family, build a career, and enhance community life, you want to ensure every dollar you invest for a loved one or chosen charity goes to benefit that person or cause. An estate bond can help do that. It leaves a nest egg for your beneficiary, with no strings and little or not tax attached.

Russ Oehmen is a New Glasgow-based benefits consultant with professional degrees in financial planning and consulting, life underwriting, and business and public administration. Comments and questions may be directed to him at benefits@fraserhoyt.com

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