How can Universal Life help business-related estate planning?

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Universal Life strategies can help business related estate planning in these ways:

• Protect your business assets.

If you own a business and die, will your partners be able to pay for your share of the company? Why not insure your life, and the lives of the other partners and key employees?

The death benefit of the policy can create immediate capital to take the business through the transition of losing one of its leaders, while allowing surviving partners to buy out the outstanding interests (payout share ownership of the deceased partner, using a buy-sell agreement), pay off creditors or in the case of the key person, provide head-hunting monies to replace him or her.

• Business owners can protect spouses.

If a spouse who was not active in your company survives, chances are he or she would rather be paid cash for the value of their shares and leave the running of the business to the surviving children or partners. It is difficult for executors to make sure that a wife, for example, is paid enough money to live on if she continues to share ownership.

In some cases, surviving spouses constantly need to be updated on the business’s finances, and performance and all too often have issues getting their due income. An insurance policy could rid the executors of the responsibility of ensuring that the company’s remaining owners pay the spouse. The insurance benefit could be paid directly to the spouse or flow through the business or the business partners as per a pre-established buy-sell agreement.

• Who is the tax-advantaged plan designed for?

As with any life insurance policy, it is designed to pay beneficiaries a tax-free benefit upon the policy owner’s death. That is the main reason to buy such a life insurance policy.

The taxation scenario is a great secondary benefit, but the main purpose should be to ensure that needs are covered by the life insurance component.

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Life Insurance and Segregated Funds Disclaimer

Life Insurance policies vary according to contract terms. Please read any Life Insurance policy contract provided, or the segregated fund summary information folder prospectus before the time of purchase. Full details of coverage, including limitations and exclusions that apply, are set out in the policy of insurance. Commissions, trailing commissions, management fees and expenses may be associated with segregated fund investments which may not be guaranteed and their market value changes daily and past performance is not indicative of future results. A description of the key features of a life insurance policy, a segregated fund; and any applicable individual variable annuity contract is contained in information provided by the company from which it is purchased. Talk to your advisor before making any financial decision. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. The information provided is accurate to the best of our knowledge as of the date of publication and is general in nature, intended for educational purposes only, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. Rules and their interpretation may change, affecting the accuracy of the information.