Gerry owns a construction company and was receiving a large salary and maxing out his CPP. His wife was not a shareholder.
MSR recommended that he restructure his corporation, include his wife as a shareholder and pay himself and his wife dividends, thus avoiding CPP payments.
Gerry had existing insurance of $500,000; however, had an insurance need of $1,000,000.
Investments were being managed by a well-respected financial advisor, and thus, remained with that advisor.
Challenges
- Additional insurance requirement
- Retirement income to replace CPP
Benefit
- MSR identified insurance and retirement needs and suggested to Gerry that he meet with a FBC Financial & Estate Planning advisor.
- MSR received in excess of $611 on the case for simply referring Gerry to a financial advisor.
Recommendations
Implement a “CPP replacement plan” and purchase a Canada Life whole life insurance plan with an initial death benefit of $360,000 and $140,000 of Term 20 for $10,530 annual premium. The tax-free death benefit will grow to over $904,000 at life expectancy (age 73) and will be available to the estate to pay taxes owing.
Gerry will also be able to take annual withdrawals or use the policy as collateral to provide retirement income. Using a rule of thumb of 6% of cash surrender value for retirement income, the member will be able to receive a monthly payment in excess of $2,100 which is double the current CPP maximum retirement benefit.
Opportunities
Future investment opportunities to supplement retirement funding.
The Case Studies are real experiences of real people, but the names are changed for reasons of privacy.