Creating Estate Liquidity
Insurance can be an effective strategy to ensure that your heirs do not have to sell some or all of your estate's assets in order to cover the tax liability. If adequate liquidity is not available in your estate then assets may have to be sold in order to pay taxes due with your final income tax return. Life insurance is can be an effective way to create estate liquidity.
Insurance can provide this liquidity when it is needed most. Policies, such as universal life and term to 100, meet the needs of individuals who face a substantial tax liability at death. Both types of policies offer a guaranteed death benefit which enable the named beneficiaries or the estate to use this money to pay the required tax, thereby preserving the assets of the estate.
Assets transferred to a spouse do not trigger immediate capital gains at the time of transfer. However, upon death of the surviving spouse, capital assets in the estate, such as stocks and bonds, are treated as if they were sold. This process is known as a deemed disposition.
Insurance can be an effective way to protect and preserve the value of your estate from erosion due to taxes. Ask a CIBC Wood Gundy Investment Advisor about this and other estate planning strategies.
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