Business Services - Corporate Insured Annuity

Your concern:

Your company, wholly owned by you, has $1,000,000 in securities. Since the paid-up capital is nominal, any distribution of its retained earnings will be treated as a taxable dividend.

How to solve the problem:

You sell the securities and acquire a single premium immediate life annuity with no guarantee on a non prescribed basis. As you are in your late sixties a large proportion of the income is a return of capital.

You now use a portion of the proceeds to pay the premiums on a $1 million policy on your life. At your death, the annuity payments cease and the company receives $1,000,000 from the life policy.

If your shares have been left to your wife or in a spousal trust, the shares roll over with no tax liability. Or, if the company is wound up, either party will receive a tax-free dividend out of the Capital Dividend Account.