Corporate Life Insurance

You may not be aware of the extent, but life insurance plays a critical role in business. Think of it as a silent partner— an extremely silent partner. So silent, in fact, that it only shows up when someone dies, to fund the shareholder agreement, or ensure a smooth succession. Oh, and occasionally it can be called upon to legally shoo tax collectors out the door.

To illustrate the important of life insurance in business succession planning, imagine yourself in the following scenario:

You have a widget business that you own 50/50 with your partner Igor (yes, Igor). Anyway, suppose Igor takes a vacation down to Baja and while jet-skiing gets devoured by a pack of rabid sea lions. Because Igor’s shares in the business are an asset, and because by law the deceased’s assets get transferred automatically to the surviving spouse, all of a sudden half your widget business is owned by Mrs. Igor.

The trouble is, Mrs. Igor knows nothing about widgets. Worse, she knows even less about business. And you are now stuck with her as your partner, unless you can afford to buy out her half of the business. And because you and Igor worked so hard for so long to make your widget business a raging success, it’s valued at quite a bit of money. So right about now, you’re wishing you and Igor had used life insurance to help fund a Shareholder Agreement (a.k.a. a Buy/Sell Agreement).

The names in this scenario have been changed to protect the innocent, but this exact situation occurs far too often. Not only can it be prevented with life insurance, but it’s just one of many useful applications:

• Funding shareholders agreements
• Family business succession and estate equalization
• Paying capital gains taxes
• Funding charitable intentions
• Tax exempt accumulation of cash within a policy
• Capital dividend account for corporate beneficiaries
• Tax free receipt of proceeds on death.

And believe it or not, proactively looking at your options to fund a shareholders agreement, develop succession plans and identify your estate objectives often begins with a very simple discussion. 

HUB International Horizon Insurance offers leading planning advice to business owners throughout Manitoba and Canada.  We work in conjunction with your legal and accounting professionals to ensure what we recommend meets your needs and is organized in the most tax efficient manner possible.  And through it all, of course, we offer professional advice to address many of the issues business owners deal with regarding shareholders agreements and corporate structures.

We realize that most business owners usually have these issues on the back burner of their mind, but are far too busy to find the time to make them the priority they deserve to be. That’s why it’s worth it to contact Ryan Matthews. He’ll be happy to sort through all the details and do all of the time-consuming legwork on your behalf. After all, just like your business is your business, this is ours.