National Best

Stats & Strategies

Many Critical Illness policies contain Best Doctors included as a feature.

Best Doctors Global Medical Care (GMC) is a unique and comprehensive insurance plan that enables you to obtain medical care from leading physicians worldwide. Designed to complement your provincial and/or employee health plan, Best Doctors ensures that your healthcare needs and costs are covered – any place, any time.

One call to Best Doctors and we’ll manage all the details, from finding the right doctor to arranging travel and reimbursing medical expenses. You benefit from: 

  • Timely access to the world’s best treatment and care.
  • Assistance finding a top specialist or treatment facility within or outside of Canada.
  • Expert second opinions on medical diagnoses and treatment plans.
  • Access to medical procedures and prescription medications unavailable in Canada.
  • One-on-one support to help you navigate the healthcare system, get answers to your medical questions, plan your travel and more.
Cancer Statistics
  • An estimated 206,200 new cases of cancer and 80,800 deaths from cancer will occur in Canada in 2017.
  • Half of all new cases will be lung, colorectal, breast and prostate cancers.
  • About 1 in 2 Canadians will develop cancer in their lifetimes and 1 in 4 will die of the disease.
  • 60% of Canadians diagnosed with cancer will survive at least 5 years after their diagnosis.
  • At the beginning of 2009, there were about 810,000 Canadians living with a cancer that had been diagnosed in the previous 10 years.

Read more: http://www.cancer.ca/en/cancer-information/cancer-101/canadian-cancer-statistics-publication/?region=on

Cardiovascular Disease Deaths

Every 7 minutes in Canada, someone dies from heart disease or stroke (Statistics Canada, 2011c).

Heart disease and stroke are two of the three leading causes of death in Canada. These statistics are based on 2008 data (the latest year available from Statistics Canada).

In 2008 cardiovascular disease accounted for (Statistics Canada, 2011c):

  • 29% of all deaths in Canada (69,703 deaths – or more than 69,500)
  • 28% of all male deaths
  • 29.7% of all female deaths

In 2008, of all cardiovascular deaths (Statistics Canada, 2011c):

  • 54% were due to ischemic heart disease
  • 20% to stroke
  • 23% to heart attack

For 2008 provincial and national mortality tables, go to Statistics Canada

Cost of Cardiovascular Diseases

Heart disease and stroke costs the Canadian economy more than $20.9 billion every year in physician services, hospital costs, lost wages and decreased productivity (Conference Board of Canada, 2010).

Strategies

Split Dollar CI Strategy

Key Person Never Acquires a Critical Illness

This strategy makes use of a common rider that is attached to critical illness insurance policies. This writer is called a return of premium (ROP) rider. In this case, the Corporation pays for the premiums of the critical illness policy on the key person. However, the key Strategiesacquire a critical illness and so never make a claim on the policy, all of the premiums are returned on a specified date or a specified age of the key person. In some cases this may be as early as the 15 year mark or the age of 65 whichever occurs first. In some policies the ROP rider may be implemented at age 75. The advantage to this particular strategy is that the returned premiums go to whoever paid for the rider – in this case the key person who receives the tax-free benefit outside of the Corporation.

Life Insurance - Key Person Dies

This insurance contract is purchased to protect the Corporation against the untimely demise of the key person. An example might be a chief financial officer whose understanding of the tax structure of the company could cost the company $500,000.00 if he were to expire unexpectedly. This risk could be alleviated with life insurance. However, it must be noted that with life insurance there must always be a clear insurable interest. In some cases, the insurance company may ask for proof that such an insurable interest exists. This may mean that the company may be asked to provide detailed financial statements to justify the insurance contract. In any case, if the key person dies Corporation will receive the benefit amount tax-free inside of the Corporation. One of the further benefits of life insurance proceeds is that they can be paid into the tax-free dividend account and distributed to shareholders on a tax-free basis. This is a strategy that is often used for succession planning and for estate transfer. This strategy can also be used to fund a retirement program tax-advantaged basis and at the same time provide efficient transfer of assets to your estate. See: Corporate Estate Transfer with Cash Withdrawal.

Life Insurance – Term 100, 10 Pay Strategy

The key person maybe life insured by the Corporation using three different types of life insurance products available: Term Life, Whole Life or Universal Life. In this example, the Corporation pays for a Term 100 life insurance contract taken out on the key person. This is a whole life policy that will pay dividends into the contract and will be paid-up in 10 years. However, during the first nine years no cash value accrues inside of the policy. However, in the 10th year a significant cash value is deposited into the policy by the insurance company. This strategy involves transferring the ownership of the policy to the annuitant in the ninth year should the company decide it no longer requires the coverage. The new owner may now access the cash value inside of the contract on a tax-free basis via a policy loan or by collapsing the policy.

Corporate UL Strategy

This strategy involves the Corporation paying the premiums on a universal life policy. Once again, the annuitant would be a key person in the Corporation and the beneficiary would be the Corporation itself. A universal life policy allows the policy owner to invest inside of the policy on a tax-deferred basis. This allows the Corporation to invest retained earnings without an immediate tax consequence. In addition, the premiums on the policy are flexible. What this means is that the Corporation could overfund the policy in the beginning and pre-pay for the insurance at the least expense. In the meantime, the investment inside the policy will grow tax-deferred. Should the key person die, the Corporation will receive the entire face value on a tax-free basis. In some cases, it may be possible for the Corporation to access the cash value inside of the insurance contract via a policy loan on a tax-free basis. However, this is a more complex strategy and requires careful consideration.

Succession Planning

Our team at national best are experts in risk management and succession planning. All businesses should have a defined exit strategy and a plan to implement that strategy. Whether the plan is to sell the business, pass the business to family members or to simply unwind the business and access the retained earnings, national best advisors and our trusted referral partners can assist. We use a combination of corporate structure, accounting strategy and insurance products to make sure that your succession planning is bulletproof.

Corporate Estate Transfer with Cash Withdrawal – A Case Study

Mr. Joe Business owns a successful private Corporation which generates $25,000 a year in excess profit. His banker has him invested in traditional investments inside of the Corporation: 50% in interest-bearing products, 30% in dividend producing stocks, and 20% in capital gains-based investments. John wants to know how these investments will do over time and how much they will eventually contribute to his estate since his son and daughter may not want to take over the business.

Historically we will assume that the interest investments returned a 4% ROI, the dividends returned 5%, and the capital gains produced a 6% return. If John died at 85 years old and there was no tax during the growth. His estate would benefit to the tune of $2,643,638.00. The reality however is quite different. Passive investments inside of the Corporation are heavily taxed. If we assume John owned an Ontario Corporation his interest investments would be taxed at 46.17%, the dividends at 33.33%, and the capital gains at 23.09%. Year after year, these taxes will reduce the growth in the assets and in the end the net benefit to his estate after taxes will only be $1,292,415.00. In other words, John will have lost nearly 51% of his gross to taxes.

Of course, there is another consideration. When Joe, who is now a healthy 40-year-old non-smoker, decides to retire at age 65 he will want to have the accumulated profits in his Corporation help fund his retirement. Once again, he will be in a position to have to pay significant tax and the net proceeds to his children will be further reduced by his withdrawals, leaving them much less than he had envisioned.

Is there a solution to this problem? Unfortunately, Joe’s banker cannot provide him with what he needs. However, if set up properly, a participating whole life policy may be able to make use of the same cash flow inside the Corporation but produce very different results.

Speak to one of our Corporate Strategy experts to find out how.

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