Don’t Put Off Your Decision to Buy Life Insurance
2016 is an opportune year to buy life insurance. New laws affecting the taxation of life insurance come into effect on January 1, 2017. After this date new policies will not perform as well as they do currently.
The good news is that the proceeds of life insurance policies paid at death still remain tax free. What has been affected is the amount of cash value that may accrue in a policy and the tax-free distribution of death proceeds from a life insurance policy owned in a corporation.
How will this impact your existing and future policies?
Adjustment to the Maximum Tax Actuarial Reserve
Whole Life and Universal Life policies are valuable vehicles in which to accumulate cash value. The limit of how much can be invested is governed by the Maximum Tax Actuarial Reserve (MTAR). If the cash value ever exceeds the MTAR limit, the policy is deemed to be “offside” and will be subject to accrual taxation. Read more
As a business owner, you may be aware that when you dispose of shares in your business you could receive an exemption on all or a portion of the capital gains that ordinarily would be taxable. This is due to the Lifetime Capital Gains Exemption which says that, for 2016, up to $824,176* of capital gains is exempt from taxation.
The Lifetime Capital Gains Exemption (LCGE) is available to individuals who are disposing of or deemed to have disposed of:
- Qualified Small Business Corporation (QSBC) shares;
- Qualified farm property; or
- Qualified fishing property **.
Focusing on growth is harder when your co-owners are your relatives
by Fred Pidsadny for ProfitGuide.com
Family-run businesses are like elastic bands—they can be stretched only so far, in different directions, before tensions cause them to snap. Those who run family businesses know that stress can often be elevated by forces that don’t exist in non-family firms, from hiring obligations and bloodline silos to next-generation financial demands to under-performing family members. It’s one thing to discipline or even fire a stranger, quite another to turf a brother or daughter. For such businesses, finding a successful balance is an ongoing challenge.
So how can family-owned businesses avoid conflict and focus on growth? For a number of years I’ve been working with a company run by three brothers, each with their own family and their own unique take on strategy and succession planning. They have benefited tremendously by learning and practicing what I call the four Cs of strategy execution for owner-managed businesses:
67% are at Risk of Succession Failure
If you are an owner in a family enterprise, the chances of your business transitioning successfully to the next generations is not very good. This has not changed over the years. Statistics show a failure rate of:
- 67% of businesses fail to succeed into the second generation
- 90% fail by the third generation
With 80% to 90% of all enterprises in North America being family owned, it is important to address the reasons why transition is difficult. Read more