Unlocking Wealth Preservation: The Missing Piece in Canadian Estate Planning
Adrian C. Spitters FCSI?, CFP?, CEA? President, Author, Private Wealth Advisor
I Execute Tax-Efficient Investment Portfolio Solutions So That Your Business, Family, And Estate Assets Are De-Risked And Protected Against Financial Risk, Economic Threats, Inflation And Higher Taxes.
When it comes to planning for the future, most high-net-worth Canadians have their eyes set on ensuring a smooth transition of their wealth to the next generation. In fact, a whopping 90% of them are actively making plans for this financial baton pass. However, there's a crucial tool that many of them seem to be overlooking.
A recent survey conducted by IG Wealth Management reveals some eye-opening insights into the world of estate planning among Canada's affluent. While 78% of respondents stated that they are working with a financial advisor, only about 54% reported having a life insurance policy. Even more surprisingly, a mere 17% claimed to have knowledge about the tax advantages and benefits of using life insurance as a tool for estate planning.
Alana Riley, head of Insurance, Mortgage, and Banking at IG Wealth Management, points out that the conversation around life insurance should not be a separate entity when discussing estate and legacy planning. She emphasizes the importance of considering permanent life insurance as an integral part of this financial puzzle.
The Gap in Estate Planning
It's clear that there's still much work to be done in this field. Canadians who consult big bank advisors often need to seek advice elsewhere for life insurance-related matters in the context of estate planning. However, at IG Wealth Management, advisors offer comprehensive guidance on both investments and life insurance products.
Riley acknowledges that discussing life insurance within the context of estate planning can be challenging. After all, it involves discussions about death, which are never easy for anyone. However, the benefits of integrating life insurance into estate planning are substantial.
Preserving Wealth Through Life Insurance
One significant advantage of permanent life insurance is its ability to fund tax liabilities upon a person's passing, preserving their wealth for the next generation. Surprisingly, only a third of respondents in IG's survey claimed to have a good understanding of the tax implications of passing on their estate to beneficiaries.
Solving Complex Estate Planning Dilemmas
Life insurance can also address complex situations where assets aren't straightforward to distribute among beneficiaries. For instance, estate equalization can become a thorny issue, particularly when a business owner has multiple children but only one is involved in the business. Without proper planning, family conflicts can arise, leaving loved ones to interpret the deceased's intentions.
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Maximizing Estates Through Life Insurance
With 58% of high-net-worth clients not having a life insurance-based estate plan, there is a significant gap in estate maximization. Aside from the tax-free death benefit, the cash value of life insurance remains sheltered from taxes. Furthermore, utilizing life insurance can expedite estate settlement processes, providing quick access to funds that may be needed immediately, such as funeral costs or other arrangements.
Closing the Conversation Gap
Despite these clear advantages, only 36% of polled high-net-worth Canadians reported that their financial advisor discusses life insurance within the context of financial and inheritance planning. This indicates a significant opportunity for improvement in the industry.
Riley suggests that advisors may need to collaborate with specialists, including insurance and estate experts, financial planning teams, estate lawyers, and accountants, to address the complex needs of their clients fully.
In conclusion, for high-net-worth Canadians looking to secure the future of their estates, it's time to take a closer look at the benefits of life insurance within the context of estate planning. This often-overlooked tool has the potential to not only preserve wealth but also ensure a smoother transition for the next generation, helping families avoid costly conflicts and delays. The missing piece in Canadian estate planning might be life insurance, and it's time to bridge that gap.
For full details, you can read the following article here: Is there a life insurance gap in affluent Canadians' estate plans?
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