JUVENILE LIFE INSURANCE

PROVIDING FOR YOUR CHILDREN OR GRANDCHILDREN

The purchase of life insurance for your children or grandchildren is not a concept that is easily considered or discussed, but the opportunities that are provided by this product should not be overlooked. This type of planning strategy allows you to benefit from the favourable taxation of permanent life insurance products, while providing a valuable asset for your children, grandchildren and generations to come. Listed below are several reasons why the use of juvenile insurance should be considered within an overall financial security planning strategy.

Transfer of Wealth: The future growth of the cash values within the permanent life insurance policy are not attributed to you, the investor. Furthermore, when you transfer ownership of this asset to the child, or to his or her parents, there are no tax implications for you. This provides for an excellent tax planning strategy.

Tax Deferral: The preferential taxation of permanent life insurance offers tax-deferred accumulation of the cash values within the policy, just as in an RRSP. The tax deferred return on “Par Account” assets after investment expenses averaged 8.7% from 1974-2003.

Control: You maintain complete control of the policy and its cash value until you wish to give that control to the child or parent. Other savings vehicles for juveniles force the contributor to give up control of the asset when the child reaches 18 years of age. In the case of trusts, you are deemed to have disposed of the asset and taxed on the resulting growth after 21 years. You do not have to give the child control of the life insurance policy until you feel that the child is responsible enough to use the asset appropriately.

Taxation: When you decide to give the child control of the policy, if any withdrawals made by the child, they are taxed at their marginal tax rate, presumably less than your personal rate of taxation.

Creditor Protection: A preferred beneficiary designation (certain immediate family members) protects the cash values from potential creditors of the policy owner.

Providing a Lasting Legacy: The policy will last for the entire life of the child. You will have provided liquidity for opportunities and emergencies, capital for their first home or business, and a life insurance benefit for their spouse and children. You have provided them with a lasting legacy.

Insurability: You will have provided a base of life insurance coverage for the child’s future obligations.

Future Insurability: The Guaranteed Insurability Benefit will give the child the ability to purchase additional insurance in the future without regard for the child’s insurability. Regardless of the child’s health, hobbies or occupation, they are guaranteed the right to purchase a predetermined amount of insurance a various ages in the child’s early adult years. You are giving the child the opportunity to provide for their children in the future. This amount is up to $600,000.

Limited Premium Requirement: The product is structured so that there can only be 20 years of premium payments. After that time the product is considered to be fully paid-up, that is, no more premiums are required. Also, premiums can be reduced or stopped earlier than 20 years.

Note: If you require any further information or if you have question, call Chris Mossing at Performance Financial 1-866-956-3838 chrismossing@performancefinancial.ca DIRECT: 956-3835