1. Strategic Tax Planning and the Large Case Market
An opportunity for strategic diversification and distribution of your assets
Stephanie Stewart, CLU, CEA, RHU, BBA
Advanced Case Consultant
Product Solutions Center

2. The information provided is based on current tax legislation and interpretations for Canadian residents and is accurate to the best of our knowledge as of the date of publication. Future changes to tax legislation and interpretations may affect this information. This information is general in nature, and is not intended to be legal or tax advice. For specific situations, you should consult the appropriate legal, accounting or tax advisor.

3. Agenda Key components to large case success The ‘tool box’ (numbers)
Client Discussion pieces
Live case examples

4. Key Components to Large Case Success
The ability to position cash value life insurance as a valuable part of their overall net worth
The ability to communicate the opportunity the insurance provides
Advisor has a process & “tool box” of discussion pieces

5. Balance of Skills for the Large Life Sale
Sales Skills
Technical Skills
Analysis
Words
Products
Stories
Competition
Questions
Promotion
Concepts

6. Insurance Planning Continuum
Net worth
Transfer
Strategic diversification of net worth
Asset substitution
Estate equalization
Accumulation
Tax advantaged alternative to fixed
income , Strategic diversification
Alternative asset class
Protection
Replaces lost earnings
Time

7. Insurance Planning Continuum
Asset Substitution / Estate Equalization
Strategic Diversification
OPPORTUNITY
Tax-Advantaged Alternative to Fixed Income
Replaces Lost Earnings Capacity
NEED

8. Insurance Planning Continuum
Asset Substitution / Estate Equalization
Strategic Diversification
DEPOSIT
Tax-Advantaged Alternative to Fixed Income
Replaces Lost Earnings Capacity
EXPENSE

9. Diversified Assets – Integrated Value
Note:
Different asset groups vary in their features and characteristics.
It makes sense to evaluate how these differences can be managed and applied to your best advantage.
These asset groups are not in competition… they complement each other.
TOTAL NET WORTH
Fixed Income Investments
Equity Investments
Business, Real Estate, etc.
Life Insurance
Growth/Risk Time Tax Treatment Accessibility Distribution
Life Insurance Characteristics
A conservative instrument
Growth is tax advantaged
Retains value when owner dies
Death Benefit is tax-free “to the named beneficiary”
Can provide additional cash resources
Low volatility
Optimized Personal Net Worth & Estate Values

10. Diversified Assets – Integrated Value
Participating Life Insurance Characteristics
Conservative instrument
Consistent and stable earnings
Growth is tax exempt
Retains value when owner dies
Death Benefit is tax-free
Can provide additional cash resources
Can be leveraged to buy or to spend
Professionally managed
Vested policy holder dividends (for 170 years)

11. Vesting

12. How participating life insurance works

13. Where it fits – strategic diversification
Permanent life insurance as part of an overall portfolio
Equities
Fixed-
income
assets
Fixed-
income
investments
Life
insurance
Other
Cash
*Stable performance, low risk, low fees, professionally managed, access to available cash value if any.

14. Net Worth Cycle

15. Tax grind (Ontario) Example 50 mns Non-registered investment
1,000,000 at 4%
At year 25
0% tax environment: $2,665,836
53.53% tax environment: $1,584,761
Cumulative loss due to tax: $1,081,075

16. Tax Grind – show them the opportunity…
Default Position Deposit: 100,000 Duration: 10 Years Growing at 4%, 53.53% tax environment Net Estate Age 70 $1,332,248 Age 80 $1,602,661 Age 90 $1,925,556
By Design : Tax-Exempt Insurance Deposit: $100,000 Duration: 10 Years Coverage: $1,434,454 Net Estate Age 70 $2,566,818 Age 80 $3,292,742 Age 90 $4,250,370
Increased Family 90: $2,324,814
Equivalent Pre-Tax Required Return: 8.91%

17. Cash is accessible if needed…
3 Policy Loan, Bank Loan, surrendering paid up additions

18. ESTATE PLANNING PROPOSAL (Living Access)
Traditional Investment 4% Deposit: $ 100,000 Duration: 10 Years Net Income 75-90: $ 139, 274 Accumulated $ 1,574,251 Net Estate 90: $ 0 NO ACCESS: $1,897,173
Tax-Exempt Insurance
Deposit: $ 100,000
Duration: Years
Coverage: $1,435,454
Net Income : $ 139,274
Accumulated: $2,089,110
Net Estate 90: $ 936,991
NO ACCESS: $4,250,372
@ 90 Increased Family Wealth with access: $1,451,850
@ 90 Required Rate of Return: 8.42%
Disclaimer
*Collateral loans involve risk. They should only be considered by sophisticated investors with high risk tolerance and access to professional advice from a lawyer and accountant. The terms of future availability of collateral loans cannot be guaranteed. The loan or line of credit must be negotiated between the policyowner and the lender. It is subject to the lender’s financial underwriting and other requirements. The policyowner should have enough income and capital to cover the interest and loan repayment, as well as the insurance premium.

19. Accessing CSV Assumptions & Incomes
Male, 50, non-smoker
Tax Exempt Insurance
Canada Life EA 20 Pay Life – Current Dividend Scale
( 10 Premiums) max ADO – Initial Coverage: $1,435,454
Collateral Loan Assumptions
Loan Rate 5% (Interest Capitalized)
Life Expectancy 90
Loan Repaid with Death Benefit
Investment Allocation
100% 4% (53.53% tax)
Disclaimer
*Collateral loans involve risk. They should only be considered by sophisticated investors with high risk tolerance and access to professional advice from a lawyer and accountant. The terms of future availability of collateral loans cannot be guaranteed. The loan or line of credit must be negotiated between the policyowner and the lender. It is subject to the lender’s financial underwriting and other requirements. The policyowner should have enough income and capital to cover the interest and loan repayment, as well as the insurance premium.

20. Funding Options Cash Flow Existing Asset
Leverage (only for the RIGHT client)

21. Immediate Financing Arrangements
Corporation
Deposits
Bank of Montreal
ScotiaBank
Toronto Dominion
CIBC
Manulife
Assignment
Life Insurance
Reinvested in business/investment
Earn X%
Loan Replenishes working capital
premiums are deposited into permanent insurance plan
client can borrow to replace working capital* (loan rates negotiable)
invest loan proceeds to generate taxable income
pay the loan interest and tax-deduct it**
net cost of pure insurance (NCPI) may also be deductible
benefit from the value of the net insurance amount and net investment

22. THANK YOU