If your client is a business owner, insurance can help provide them with not only protection, but opportunity when it comes to growing their business. Life insurance policies can help protect shareholders and their family members, the corporation itself, as well as key persons to the business. It can also help enhance cash flow to the corporation by assigning the policy as collateral for a loan. The client friendly article linked below reviews the importance of shareholders’ agreements, as well as other uses of corporate-owned insurance such as key person insurance, use of insurance as collateral, charitable giving, estate protection and estate equalization. Share the link and help your clients recognize that their life, their family and their business all deserve protection, and that insurance can not only provide that protection but can also help to build assets in a tax effective way for their retirement and estate plan. For more information on how your client can safeguard their business, share the client-friendly versions of The Importance of Corporate Insurance for Your Client, Policy Transfers: The Importance of Planning in Advance and SMART TALK… how insurance can help your clients build their business. Have questions? Reach out to your local PPI Collaboration Centre – we’re here for you!

There are many reasons in the corporate context to have one company (a holding company or a sister company) own the life insurance policy on a shareholder and have the operating company as the beneficiary.  One very important reason is that the separation allows for the operating company to fund the buy out of the shareholder’s estate on the death of the shareholder pursuant to a shareholder agreement. Other reasons include: protecting the policy cash surrender value (CSV) from the operating company’s creditors; maintaining the qualification of the operating company for the qualified small business corporation exemption (since the CSV is not an asset used in active business and could put the company offside); and if the operating company is sold, having another company own the policy avoids onerous tax consequences that could result from the transfer of the policy to the shareholder. The question that arises is which company should pay the premium, the operating company since they are the beneficiary or the holding company since they are the owner and entitled to the rights to the policy on surrender. This issue was the subject of a recent Federal Court of Appeal tax case, Gestion Roy v The King (2024 FCA 16). The Federal Court of Canada confirmed the Tax Court of Canada’s decision and assessed a benefit to the holding company and a sister company respectively, as Opco had paid for the premiums on the policies of which it was the beneficiary. While the insurance industry may not agree with this decision, it is the law. In many cases, instead of the operating company paying the premium (like in the Roy case), the operating company could pay a tax-free (if certain requirements are met*) inter-corporate dividend to the holding company, which would then enable the holding company to pay the premium. While the facts in this arrangement aren’t the same as in Roy, the CRA has stated in past Technical Interpretations that it could still possibly assess a benefit. We believe the CRA view can be countered with a number of technical arguments. To review the CRA’s past positions on the payment of insurance premiums when there is a separation of ownership from beneficiary and review a summary of the Roy case, please read the Tax Bulletin, Corporate Life Insurance Premiums – How to Avoid Taxable Benefits. And for more information on the tax consequences of transferring a policy see the Tax Bulletin, Transferring Life Insurance – What You Need to Know or visit the Professional Resource Centre. Contact your local PPI Collaboration Centre if you have clients that could be affected by the Roy decision. *The holding company must own more than 10% of the operating company and there must be sufficient safe income (tax paid retained earnings) on the shares

The process of obtaining insurance is no small feat. From the application process, to medicals, to policy payments and more, there are many steps involved in securing insurance for your client and their family. Here is a great article for you to share with your clients; something to explain in detail the full process of acquiring insurance. Of course, you will need to follow up with a phone call and perhaps a meeting, but this article is a good way to start the insurance conversation and provide your clients with a roadmap to what they can expect during this time. For more articles on how insurance can provide your clients with financial security and peace of mind, read/watch, then share Avoid Underwriting Surprises, SMART TALK… about insurance and INFOCLIP: Building Lifetime Protection. And if you have any questions or would like to learn more on how to kick start those important conversations with clients, contact your local PPI Collaboration Centre.

Throughout your client’s lifetime, they may set many goals for themselves and their family. But what would happen if your client encountered an unexpected life event or financial emergency that could prevent them from achieving their goals? A premature death could eliminate the income your client’s family needs to put towards their savings goals. An accident or unexpected illness could significantly reduce their income or dramatically increase their expenses. In either of these events, how could your client access capital in order to ensure their family’s financial goals can still be achieved? Watch this video, part of our INFOclip series, to find out what strategies your client and their family can implement during or before a financial emergency. And for similar articles about income replacement strategies, be sure to share the CI and DI: Enhancing Your Client’s Benefit Package article and our Strengthening Your Client’s Safety Net with Critical Illness Insurance tool.

Having a drink, taking a shot, chugging a brew are familiar synonyms for alcohol consumption. This is neither new nor regional. Humankind the world over has been fermenting beverages for millennia with the oldest verifiable brewery located near Haifa in modern day Israel (1). Whether imbibing baijiu in Shanghai, sake in Tokyo, ouzo in Athens or a stunning variety of wines in the Mediterranean countries, the cultural and geographical blueprint for alcohol use runs deep and broad. France even has wines named after some of its’ most famous regions as any proud denizen of Champagne or Bordeaux will boast. Today’s spirited debate is not about alcohol abuse. There is an acknowledged acceptance that too much ethanol, the toxic compound in alcoholic drinks, is unhealthy in the best case and potentially lethal in the worst. It is estimated there are nearly 3 million deaths worldwide annually related to alcohol misuse, half of those deaths due to injuries and digestive diseases like cirrhosis of the liver (2). This article explores the question of whether any alcohol is good for us, or at least non-harmful. For several decades, a popular school of thought was that some alcohol, maybe 1-2 glasses of red wine daily, might be a good source of the antioxidant, resveratrol. This polyphenol found in the skin of red grapes was thought to protect the heart and lower the risk of coronary heart disease. More recent research disputes this claim. It is now more accepted that moderate wine use may be just one indicator of a healthy lifestyle such as good diet, regular physical activity, and psychosocial fitness that provide a framework for promoting longevity. More recently, the question of whether any alcohol use is healthy or even safe has resurfaced. The American Heart Association tells non-drinkers not to start drinking (3). Guidance published in Canada is more direct declaring the only health benefit from alcohol is to avoid drinking altogether. The same guidelines acknowledge that 2 drinks a week is not risky but that even 3-6 drinks weekly raises the cancer risk. Seven drinks a week begins to adversely impact the risk for stroke and even heart disease, a rejection of the argument that 1-2 drinks a day is good for the heart. Every drink beyond seven per week adds to the more immediate risks associated with alcohol misuse such as injuries, violence and the digestive diseases mentioned earlier (4). What is the underwriting takeaway? Not much right now. Curious underwriters almost always ask about alcohol use and those applicants having 1-2 drinks a day are not a concern in underwriting. Still, thoughtful underwriters look at the big picture of information in the case file and an elevated liver enzyme or two coupled with a less than stellar driving record may get a second look at the stated alcohol use. We’ll keep an eye on this topic with a glass half-full (or maybe less) perspective. History of alcoholic drinks. www.Wikipedia.org. N.D. Poznyak, Vladimir and Rekve, Dag. Global status report on alcohol and health 2018. World Health Organization (WHO). September 2018. American Heart Association. Is drinking alcohol part of a healthy lifestyle? American Stroke December 30, 2019. Canadian Centre on Substance Abuse and Addiction. Canada’s Guidance on Alcohol and Health: Final Report. ccsa.ca. January 2023.

New Year celebrations have come and gone, but don’t worry, it’s not too late for your client to make an RRSP contribution for 2023. The Income Tax Act allows an RRSP contribution that is made within the first 60 days of the following year to be used either in the year of contribution or in the year prior. So, if your client makes an RRSP contribution by February 29, 2024, the contribution can still be used as a deduction from their 2023 income. Definitely some good news to share with your clients! The maximum amount your client can contribute to an RRSP for 2023 is 18% of the earned income that they reported on their 2022 tax return or $30,780 – whichever is less. However, your client may have unused RRSP contribution room that has been carried forward from prior years so they could potentially make a larger contribution. The maximum contribution they can make for 2023 (including any carry forward) is stated on their 2022 Notice of Assessment. So, if your client forgot to make an RRSP contribution for 2023, or after reviewing their total income for 2023 they think they might need to make an additional RRSP contribution, the first step is for them to check their 2022 Notice of Assessment to determine the maximum they can contribute and then look at the tax bracket they are in for 2023 based on their income. Remember that it’s advantageous for your client to make an RRSP contribution when they are in a higher tax bracket than they expect to be when drawing their retirement income. Share this RRSP Tax Savings Calculator with your client to help them in their calculations. For additional information on RRSPs you can share with your clients, check out the video INFOclip: RRSP vs TFSA and the article ABC’s of Spousal RRSP, as well as the Optimizing Your RRSP and Tale of Two RRSP’s calculators. For more information on RRSPs and other investment options, be sure to contact your local PPI Collaboration Centre.

The time for your client to file their 2023 personal income tax return is just around the corner. Need a reminder about how Canadians are taxed, including something to share with your clients… read on. Individuals who reside in Canada are taxed on the worldwide income they receive in the calendar year. There is a federal layer of tax and a provincial layer of tax. The tax rate your client pays depends on the amount of the taxable income they received in the calendar year and the tax brackets they fall into. The 2023 Federal tax brackets are shown in the table below (which are indexed each year for inflation). Each province also has its own tax brackets and rates. Federal Tax Bracket Rate Up to $53,359 15.00% $53,360 – $106,717 20.50% $106,718 – $165,430 26.00% $165,431 – $235,675 29.00% $235,676 and over 33.00% As you can see, the rate your client pays will be a blended rate depending on their taxable income for the year. They pay Federal tax at 15% on the first $53,359, then the rate increases to 20.50% for income above $53,359 etc. Once their income is over $235,676, then every dollar after that will be at the 33% Federal tax rate. With provincial taxes added on, the top combined income tax rate ranges from 44.50% in Nunuvut to 54.80% in Newfoundland and Labrador. Have your client check out these links for the combined Federal and Provincial tax rates for the province in which they reside: E&Y (rates and a personal tax calculator), KPMG (tax rates and brackets), as well as this Tax Calculator. There is an alternative minimum tax (AMT) that could apply if your client has certain preference items. A taxpayer pays the higher of AMT and regular income tax. There are changes to the AMT for 2024 which are outlined in our Advisor Talk article Alternative Minimum Tax Changes – What Your Client Needs to Know – don’t forget to share this with your clients. Some types of income are more tax efficient than others. If your client earns capital gains, only 50% of the gain will be included in their taxable income, while their employment and investment income will be fully taxed. Withdrawals from your client’s RRSP or RRIF are also fully taxable. Dividends receive preferential tax treatment through the use of the dividend gross-up and tax credit. There are two types of dividends: eligible and non-eligible dividends. Non-eligible dividends are taxed at a higher rate than eligible dividends. Usually, dividends your client receives in their investment portfolio would be eligible dividends (dividends from publicly traded securities). While your client prepares their 2023 tax return, have them review the types of income they earned and evaluate if they should make a change to the types of income they are receiving. However, remind them to not let the taxation of the income be the only reason for changing an investment – type of income should match their financial planning goals. Certain expenditures are deductible from your client’s income and there are also tax credits that can reduce their tax liability. The CRA’s website has a page that describes the deductions and tax credits that are available that can reduce your client’s tax liability. To be applied to your client’s tax return, the expenses must have been incurred by December 31 of the tax year in question (except for RRSP contributions which can be made 60 days after year end and still reduce the prior year tax liability – so for the 2023 tax year, RRSP contributions can be made up to February 29, 2024). For employees, there are less deductions than for those who are self-employed. The most common deductions are for RRSP contributions, childcare expenses, capital losses and investment related expenses. New for 2023 is the first home savings account (FHSA). The contribution limit for this account is $8,000 and is tax deductible. For more information on how this account works, have your client consult CRA’s First Home Savings Account (FHSA) page. The most common credits are for medical expenses, charitable donations and tuition fees. Of course, there are also ways for your client to save taxes on income in the long-term by investing in a tax-free savings account (TFSA) or registered education savings plan (RESP), for example. While contributions to these types of plans don’t result in a deduction on your client’s tax return, the income earned in the plans are not taxable while in the plan. For TFSA, there is no tax for your client on withdrawal. For RESP, the funds are taxed in the hands of the student. The TFSA contribution limit for 2024 is $7,000. If your client has not made a TFSA contribution in the past, the contribution room carries forward. For example, if they were 18 years or older in 2009 and have never contributed to a TFSA, they could contribute $95,000 to a TFSA in 2024. For more information on how TFSAs work, read How Your Client Can Use a TFSA to Get Better Investing Results. For more information on RESPs, check out Helping Your Client Maximize their RESP, SMART TALK… about registered savings plans (RESPs) and this Start Education Planning Now calculator. NOW is also an opportune time to check in with your clients and review their overall financial and estate plan which would include your client’s wills, power of attorney and representation agreements, life insurance needs as well as critical illness and disability insurance. If you have any tax related questions, be sure to reach out to your local PPI Collaboration Centre for more information – we’re here to help!

As the year comes to an end and we look forward to the new year, let’s revisit some of the insurance and investment related articles, videos, calculators and tools that were on your clients’ favourites list in 2023 – check them out and be sure to share them with new clients and prospects. INSURANCE Do Younger Canadians Need Insurance? Does your client think they are too young to purchase insurance? Help them discover all of the compelling reasons why they should consider purchasing insurance early in life. Be sure to share this client-friendly article! The Importance of Insurance Reviews – Things Your Client Should Consider Share why NOW is the perfect time for your client to review their insurance needs and make sure that they and their family have the adequate protection in place. Be sure to share this client-friendly article! Learning From Experience: The Carte’s Story It’s important for your client to discuss the transfer of their estate with their family in advance – share this story about the Carte family and how they managed (or mismanaged) the transfer of their family cottage. Be sure to share this client-friendly article! VIDEOS INFOclip: Building Lifetime Protection Is your client’s life insurance plan designed to last a lifetime? Share this video, part of our INFOclip series, to demonstrate an insurance strategy to help build a lifetime of protection for your client and their family. Be sure to share this client-friendly article! INFOclip: Gifting Your Life Insurance If your client no longer needs their life insurance, have they considered gifting their policy to charity? Share this video with your client to help them understand their options, and the caveats involved, in donating their insurance to charity. Be sure to share this client-friendly article! INFOclip: Transferring Wealth to Future Generations Share this video with your client to show how using “cascading insurance” can help provide financial protection, while also creating a tax-efficient vehicle to enhance and transfer wealth to future generations. Be sure to share this client-friendly article! CALCULATORS Tale of Two RRSPs Is your client interested in RRSPs? Share this calculator to compare and contrast contribution amounts, frequencies, and timing to help them find the best strategy for meeting their goals. Be sure to share this client-friendly article! GIC Laddering Your client can benefit from attractive GIC rates without locking in their entire investment for a long duration. Have your client try this calculator to see the potential advantages of GIC laddering. Be sure to share this client-friendly article! Charitable Donations Calculator Share this calculator with your client to help them estimate the after-tax cost of charitable donations during their lifetime or upon their death. Be sure to share this client-friendly article! TOOLS The Value of Taking Risks When interest rates and inflation are high, have your client consider the value of taking risks to increase their purchasing power – share this tool to demonstrate that value. Be sure to share this client-friendly article! Strengthening Your Client’s Safety Net with Critical Illness Insurance Insurance works as a safety net to meet financial obligations in case of unforeseen events. But does your client’s safety net have any holes in it? Share this tool to help them find out and learn about the many benefits of critical illness insurance. Be sure to share this client-friendly article! Exploring Your Client’s Life Insurance Options Your client already knows that life insurance provides them with a lump sum benefit payable to their beneficiary, but not all life insurance plans are created equal – this tool is a 101 of life insurance options for your client. Be sure to share this client-friendly article! And if you have any questions or would like to know more about any of these topics, contact your local PPI Collaboration Centre.

Everywhere you go Take a look at your T5 and T4, or you may soon be poor With all the taxes at your door. It’s that lovely time of the year when everyone is full of cheer (the 2023 brand of cheer, that is!) And now, tax season is just around the corner. But that’s no reason to fret! You still have time to act and ensure your taxes are a delight and not a downright fright. That little extra time may just be enough to pay off that pony you just bought little Tony. So, here’s a little gift to get your season started right whether you’re a toy building elf, a gift giving saint, or a retired snowman, there’s a tax guide for you.   Tax Planning Guides TaxMatters – from Ernst & Young Year-End Tax Tips for Personal Taxes – from KPMG Year-End Tax Tips for Owner-Managers – from KPMG Year-End Tax Planner – from PwC Managing Your Personal Taxes 2023-24 – A Canadian Perspective | EY Canada

Every dollar counts when your clients are working hard to meet their financial obligations while also saving for retirement. This calculator shows how they could increase their expected tax refund and use it to increase their planned RRSP contribution, significantly enhancing their short and long-term RRSP savings. Your clients have options to temporarily fund their additional contribution using an out-of-pocket strategy or a conservative short-term RRSP loan strategy (until they recoup it from their expected refund). Share Optimizing Your RRSP with your clients to show them how they can make the most of their RRSP. Questions? Contact your local PPI Collaboration Centre.

Lars and Nora knew how to set their employees up for success, whether they were coming or going.  Read about how their creative insurance planning benefited their employees and their business. At just the right time, their Overhead Expense coverage and Wage Loss Replacement Plan gave them the breathing room they needed to envision a corporate restructure that set the company and key employees up for sustained growth and long-term success. Share their story with your clients to help start new conversations about creative corporate insurance planning. For more information on group and individual disability insurance, read our articles:  Disability Insurance: Is Employee Coverage Enough? and Insuring Your Client’s Greatest Asset with Disability Insurance. Questions? Contact your local PPI Collaboration Centre.

The 2023 Federal Budget proposed changes to the existing Alternative Minimum Tax (AMT) rules with draft legislation released on August 4, 2023. These revised rules will apply beginning January 1, 2024. What is AMT? The AMT was introduced in 1986 as a parallel tax to the regular tax system and applies to individuals, but not corporations. The AMT requires certain “preference” items to be added back into income to determine the alternative tax. There is an exemption amount that is currently $40,000 so if the taxable income for the year calculated under AMT does not exceed this amount, AMT will not apply. A taxpayer client pays the higher of AMT or regular tax and the additional tax paid under the AMT can be carried forward as a credit to offset regular tax for seven years. AMT does not apply in the year of death of a taxpayer. Under the existing AMT rules, the most common situations where AMT could apply is where a taxpayer has large capital gains and especially if the lifetime capital gains exemption was used on a sale of qualified small business corporation shares or qualified farm and fishing property. What are the changes? The 2023 Federal Budget has proposed changes to broaden the tax base subject to AMT, increasing the tax rate but also increasing the exemption amount. The following table highlights some of the proposed changes. To review all the changes, be sure to contact your local PPI Collaboration Centre. Existing AMT Proposed AMT Tax rate 15% 20.5% Exemption amount $40,000 $173,000 Capital gains Include 80% Include 100% Capital gains using QSBC/QFFP Include 30% Include 30% Capital gains on donation of public securities Include 0% Include 30% Capital gains on donated property Include 50% Include 100% Interest and carrying charges to earn property income Deduct 100% Deduct 50% Many non-refundable tax credits (including the donation tax credit) Full credit 50% of credit What does your client need to do? These proposed changes could result in AMT applying if your client’s taxable income (calculated for AMT purposes) is in excess of $173,000. In addition to being aware of the implications of AMT when there are large capital gains in a year (and planning for it), starting in 2024 your client will need to consider the implications of significant interest deductions (for example, if using a leveraging strategy) or large donations (especially gifts of capital property, as these donations not only have the 50% limitation on the donation tax credit, but also 100% or 30% of the gain, depending on the type of property, could be included in your client’s taxable income for AMT). It is essential that you work with your client and their professional advisors to help them prepare the calculations to determine if AMT will apply, and determine their planning options.

Did you know that as an Advisor with PPI, you can qualify for access to AmpLiFi, our all-in-one cloud-based sales enablement platform that helps you quote, generate leads, manage in-force business and ultimately, close more deals? Part of PPI’s Stratosphere digital suite of tools, AmpLiFi helps guide you and your client through the sales process. When you share a Your Link Between article, your reader can click the ‘request a quote’ button, launching the AmpLifi experience — which assists with needs analysis, quoting and helps to close the deal —this tool can take you and your client from start to finish seamlessly and elevate your practice to a new level. Watch this video to learn more about the AmpLiFi experience and, if you’d like more information, be sure to contact your local PPI Sales Team.

Critical illness insurance (CI) seems to be something most clients know a little bit about. Sure, it’s a great complement to life insurance and disability income protection (replacing neither), but when it comes to purchase, CI is perhaps the first item of the client recommendation to be eliminated, once the client suggests it seems “too expensive”. Now you have a decision to make with your clients… do you show the true value of critical illness insurance to your client as an added layer of protection and the peace of mind knowing it helps keep them and their family secure or do you baulk at the high cost of CI? The Origins of Critical Illness Insurance Critical illness insurance was “invented” in South Africa in the 1980’s by Dr Marius Barnard (part of the team that performed the first human-to-human heart transplant). Barnard recognized that with modern medical advancements, more and more people could actually survive critical conditions… but then didn’t have the funds to pay for elements of this survival including: Additional/alternate medical costs not paid for by government or private plans. Alterations to a survivor’s home to accommodate their new physical condition. Covering day-to-day expenses from a longer period of time off work; something their employer won’t cover. Not being able to work as many hours or work in the same profession, causing an income shortfall. An extended holiday with loved ones to celebrate recovery. Critical illness insurance only came to Canada in the 1990’s – a little late in the game and at a time when parents would not have instilled into their children the need to have this type of coverage. In comparison, life insurance is said to have origins as early as 700 BC, so it’s no wonder the importance of life insurance has been stressed throughout the decades. But should we be stressing the same level of importance for CI? The Benefits of Critical Illness Insurance As mentioned, CI helps offer your client another layer of income protection and the peace of mind knowing their finances have some protection at an already difficult time in their lives. Some of the benefits of CI include: Paid as a lump sum amount based on the insured suffering a covered “critical” condition, CI covers the major illness such as cancer, heart attack, stroke and kidney failure; some policies can even cover up to 26 different conditions. Unlike life insurance, the CI policy holder can receive their payment for themselves, to spend as they like and when they see fit. The power is in the hands of your client! Unlike life insurance that centres around leaving money to your client’s beneficiaries, CI focuses on financial protection, allowing them to focus on treatment, recovery, as well as any additional medical care, if needed. A number of CI policies offer your client (at an additional cost) flexible options for the return of their premiums, should they live a healthy, illness-free life – money that your client can put towards their retirement or other expenses. If your client is a business owner, they can help protect their business against the instability of a key employee becoming sick. CI coverage helps to protect your client from liquidating assets or impacting their retirement savings plan in the event of a serious illness. Risk to Investment Planning Your client has worked hard to accumulate some investments – that’s fantastic! But what would happen to all their hard-earned investments if they didn’t have critical illness coverage? Here’s an example to share with your client… a 45-year-old has long-term savings in place, but no CI policy. They are diagnosed with cancer and, after successful treatment, need to access $50,000 as part of their recovery, but they only have their RRSP to take this from. How will this impact their investment planning? Withdrawal cannot be recontributed, so contribution room has been lost/wasted. Assets being sold may have dropped in value. Assuming a marginal tax rate of just 35%, the gross amount required to be withdrawn would be circa $77,000 to achieve the net amount of $50,000. There is lost compound growth opportunity on the withdrawn funds. Had the $77,000 not been withdrawn, assuming a pre-tax annual growth rate of 5%, it would have added another $204,303.92 to the RRSP’s value by age 65! Retirement may need to be delayed and/or a lower income taken. It Won’t Happen To Me… Will It? If your client is still on the fence about the importance of purchasing critical illness insurance, here are a few stats for them to consider: For a 35-year-old in good health, 31% of men and 23% of women will suffer a critical illness before age 65. (1) 2 in 5 Canadians are expected to be diagnosed with cancer in their lifetime. (2) In 2021 in Canada, 77% of critical illness claims (in this case, with Sun Life Financial) were paid to those under the age of 61, with just 23% being to those aged 61 and above. (3) Over 1.5 million Canadians are living with and beyond cancer up to 25 years after a cancer diagnosis. (4) Factoring these stats, just 8% of Canadians have critical illness insurance (5) – this at a time when a healthy 35-year-old non-smoker could attain coverage to age 65 for a $50,000 tax-free lump sum payout for just over $40 per month. (6) With earlier detection of certain illnesses and better treatment options, shouldn’t we be emphasizing the importance of critical illness insurance? The Differentiator In Your Practice You know how competitive the marketplace has become. So, the real question remains, do you choose to baulk at the cost of critical illness insurance OR do you want to be the Advisor who wins a new client because you can clearly and meaningfully position the true value of CI (and potentially be paid on multiple solutions)? For similar content about critical illness insurance to share with your clients, check out CIDI: Enhancing Your Client’s Benefit Package, Protecting Your Clients’ Retirement with Critical Illness Insurance and Critical Illness Insurance – Financial Protection for Your Client and the Strengthening Your Client’s Safety Net with Critical Illness Insurance tool help your client discover the likelihood of some commonly known risks actually occurring. And if you have any questions about the benefits of CI or need a little more information, please contact your local PPI Collaboration Centre. iA Financial Group. Corporate Critical Illness Insurance To Protect Assets. 2023. Canadian Cancer Society. Cancer Statistics At A Glance. Cancer.ca. N.D. Sun Life. Understanding Critical Illness Insurance Claims. Sunlife.ca. N.D. Canadian Cancer Society. New Canadian Cancer Statistics Report Reveals Over 1.5 Million People In Canada Are Living With Or Beyond Cancer. Cancer.ca. N.D. iA Financial Group. Corporate Critical Illness Insurance To Protect Assets. 2023. 2023.

An article by PPI’s Planning Services team, a group of lawyers, accountants and actuaries who provide tax and estate planning support to Advisors affiliated with PPI. The taxation of intergenerational transfers in Canada has been in the news over the last several years. A private members’ Bill, Bill C-208, proposed changes to section 84.1 of the Income Tax Act to exempt certain intergenerational transfers from this anti-avoidance provision (the anti-avoidance rule is intended to prevent stripping surplus out of a corporation as a tax-free return of capital rather than a taxable dividend). The changes proposed in Bill C-208 became law in June 2021 but the Department of Finance had concerns that the rules were too broad and might result in abuse. The Department of Finance announced revisions to the rules in the 2023 Federal Budget, which are more restrictive than the original proposals in Bill C-208 and are contained in the draft legislation of August 4, 2023. The revised rules come into effect on January 1, 2024, so there is a shrinking planning window for those cases in which it may make sense to apply the existing rules.* Before we discuss the planning options in this changing landscape, let’s review why Bill C-208 was considered necessary. Bill C-208 – Why did it come about? The anti-avoidance rules in section 84.1 of the Income Tax Act convert a taxable capital gain into a taxable dividend in non-arm’s length situations if certain conditions are satisfied. Generally, section 84.1 will apply when a taxpayer resident in Canada (that is not a corporation) transfers shares of a Canadian corporation to another corporation on a non-arm’s length basis. These rules are punitive since current dividend tax rates are higher than capital gain rates. In addition, the qualified small business corporation exemption and the qualified farm and fishing corporation exemption would not be available (the exemptions for 2023 are $971,190 and $1,000,000 respectively). This provision therefore hindered the transfer of family businesses to the next generation when the business was sold to a child’s corporation and made it more favorable from a tax perspective to sell to an arm’s length third party corporation. The revisions announced in the 2023 Federal Budget are meant to address the concern that the exemption from section 84.1 should only apply when there is a “genuine” intergenerational transfer. The rules retain the original requirements that the shares must be that of a qualified small business corporation or a qualified farm and fishing corporation and the purchaser corporation be controlled by one or more children of the transferor. The revisions deal with the concerns that the Department of Finance raised regarding the transfer of control, management, and economic interests to the next generation within certain time frames. When considering this planning, keep in mind that there is an expanded definition of ‘child’ (e.g., can include grandchildren) that should be reviewed before undertaking the planning. Family Business transfer options proposed in the 2023 Federal Budget There are two proposed transfer options: immediate and gradual. As the name implies, the gradual transfer option allows more time to transfer the control and management of the business to the next generation. For the immediate transfer option, the parent must transfer both legal and factual control to the adult child immediately, and the balance of the voting and growth shares must be transferred within 36 months. In addition, the adult child must take over management of the business within 36 months and must retain legal control and work in the business for 36 months following the share transfer. On the other hand, the gradual transfer option only requires that legal control be transferred immediately with the balance of the voting and growth shares required to be transferred within 36 months. There is an additional requirement under the gradual option that within 10 years of the transfer, the parent must reduce the value of their debt and equity interests in the business to 30 per cent of the value of all their interests at the time of sale (50 per cent of the value for a family farm or fishing corporation). The adult child must take over management of the business within 36 months and must retain legal control and work in the business for 60 months following the transfer. Under either option, the reassessment period is extended. For the immediate transfer, the reassessment period is extended by 3 years while for the gradual transfer it is extended 10 years. The extension of the period in which CRA can make a reassessment should be considered carefully. There are other aspects of the rules that need to be reviewed before any planning is completed. Family Business transfer choices: use the existing rules (by December 31, 2023!), the new rules, or another option? A question for family business owners who want to transfer their business to the next generation is whether they want to complete the planning under the revised rules, under the original rules (by December 31, 2023) that are less restrictive, or under other planning options. The key question to address is how soon the owner wants to give up management and control. Two options under the new rules (that become effective January 1, 2024) If the transfer of legal and factual control is not a concern for the owner, then the new immediate transfer rules provide a tax efficient succession plan. If the transfer of factual control is an issue, then the new gradual transfer option should be reviewed keeping in mind the reduction of debt and equity interests (preferred shares) within 10 years plus the longer reassessment period and the longer period that the child must be working in the business. Using the existing rules by December 31, 2023 – If the owner is not ready to give up control, then planning could be completed to fall into the less restrictive existing provisions of the original Bill C-208 which are effective until December 31, 2023. Time is running out to use this option! If this option is to be considered, keep in mind there must be a true intention to transfer the business, as Finance and CRA have stated they will look at transactions that abuse the intent of the rules.* Other planning options – If the owner wants to transfer the business gradually, then consider a collateral assignment of a life insurance policy so that an adult child can borrow funds to purchase the shares personally. Life insurance alternative Let’s look at the life insurance alternative noted above in the final bullet point. While the changes to section 84.1 make intergenerational transfers more tax efficient, the rules are complex and there may be situations where the parent might not want to transfer control entirely and might want to be involved in the business longer than the proposed revisions to section 84.1 will allow. In these situations, life insurance can be a valuable tool to fund the buyout of the parent. The strategy involves using insurance on the life of the parent(s), that is owned by the child’s holding company, as collateral for a personal loan for the child. The child would use the loan to buy a portion of the parent’s shares (maybe equal to the QSBC exemption). An estate freeze may have to be completed to facilitate this planning. The rules in section 84.1 should not apply since the purchase of the parent’s shares is made by the child personally and not by the child’s holding company, PPI has a technical strategy (TS-130 Using The Capital Gains Exemption in a Family Success Plan) that discusses this planning idea.  However, the proposed revisions to the alternative minimum tax (AMT) rules should be reviewed with the child’s professional advisors since the interest paid on the loan would be a tax preference item of which 50% would have to be added back when calculating AMT. Contact your local PPI Collaboration Centre for more information. *This is not the case in the province of Quebec where the current rules are more restrictive, however on January 1, 2024, Quebec will harmonize its provincial rules with the new federal rules. This document is for general information purposes and Advisor use. The information contained in this document must not be taken or relied upon by the reader as legal, accounting, taxation, financial, actuarial or other advice made to them, or to any other person or firm, by PPI or any of its affiliates. Please refer to insurance company illustrations, policy contracts and information folders regarding any insurance matters referred to in this document. Readers must seek independent professional advice with regard to the verification and use of the information contained in this document. Copying or reproduction of this document is not allowed without the express prior written consent of PPI.

If you’re an Advisor specializing in investment products, now may be a good time to consider adding insurance solutions into your practice. Today, clients are looking for holistic planning – that’s  planning for a financial future with a knowledgeable, well-rounded Advisor who can offer a one-stop-shop for financial solutions and the peace of mind knowing they and their loved ones are safeguarded entirely with no gaps in their financial protection. Here are 10 reasons to embrace holistic planning, including insurance, into your wealth practice… because insurance is not just a revenue opportunity, it’s a critical layer of protection for your clients and their families: Compete in the marketplace – all banks and some independent Advisors already offer insurance as part of a holistic planning strategy. To future-proof your practice, ensure that you compete! Multi Professional Approach – many wealth clients work with lawyers and accountants (or other professional Advisors) and those other professional Advisors recommend insurance; be the Advisor to deliver on those needs. Retaining Next Generation – not considering insurance as part of estate planning could mean the next generation inheriting the family assets receives a much lower amount and/or has to liquidate cherished assets (e.g., family cottage). This loss will only encourage them to seek advice from a different Advisor. (Fun fact: the number of kids choosing NOT to use the same Advisor as their parents is upward of 66%). (1) Tax and Investment Benefits – outside of registered investments, insurance stands out as being one of the most tax-efficient planning methods (accumulation, drawdown and at death, for example). It can also be used as a unique asset class to diversify into (participating insurance underlying holdings risk vs. return). Diversified Revenue Stream – where a wealth Advisor has fixed expenses and markets dip, insurance can be that diversified revenue stream. Additional Referrals – you get referrals for giving great wealth advice, but what if you add on referrals for insurance advice? Up-front compensation – you are compensated with first year commission (FYC) for insurance, which can smooth out your revenue stream. That’s two birds with one stone! Increase Book Value for Partial/Full Sale of your practice – the more accounts/services a client receives through you, the stronger your relationship with them, which could make a potential buyer more comfortable with the risk they are taking, maximizing your asking price. Ongoing insurance renewals will increase the value of the clients, alongside the revenue their investment business generates. Protecting Assets from sickness/disability – perhaps for clients starting out on their wealth accumulation journey, a sickness or disability could mean that they need to withdraw from their long-term investments (and get heavily taxed for this)! Living benefits would certainly help this client replace their income (and pay into those investments) until they are back to good health. Growing Practice – insurance revenue could facilitate the faster growth of your practice. Hiring that extra team member, investing in a Customer Relationship Manager (CRM), upgrading offices, upgrading your website, etc. – this can all help to take your practice to the next level! Yes, adding insurance to an investment practice may seem daunting, but PPI is here to support YOU as you build your holistic practice. As a successful wealth Advisor, it’s important to know all the ways that insurance can add, not detract, from your wealth business and how it can provide your client with the holistic planning for their financial future that they and their family need and deserve. For more information on holistic planning and the many benefits of insurance, contact your local PPI Collaboration Centre. Stewart, John. All in the family. Manulife Advisor Focus. 2023.

Is your client expecting a new family member? What an exciting time, but equally as scary when they begin to consider all the uncertainties that come with parenting. First day of school, learning to drive, parties and dating… over the years, there will be plenty of things for your client to worry about as their child grows up and ventures into an independent life – however, finances should never be one of those worries. Here are a few key aspects for your client to consider when laying out a solid financial foundation for the newest members of their growing family. Savings For Those Important Milestones Life is full of exciting new milestones; attending university or college and buying a first home are perhaps amongst the most significant, not to mention costly. As a new parent, what should your client consider today and how can they best prepare for the future? Post Secondary Education: At first glace, the most common concern is saving for a child’s post secondary education; rising costs of tuition and housing have made it necessary to save now, well before that those milestones arrive. The government sponsored Registered Education Savings Plan (RESP) account is an obvious and strong choice for your client to consider for the following reasons: Availability of federal government grants – the government will match 20% of your client’s contributions up to $500 per year, to a lifetime limit of $7,200. Free money!* Tax-free growth of the investments within an RESP – your client can contribute up to a lifetime maximum of $50,000 per child and although the income is taxable in the student’s hand when withdrawn, as a student, they are typically in a much lower tax bracket. Be sure to check out (and share!) PPI’s SMART TALK… about registered education savings plans (RESPs) video, our Getting the Most from Your RESP article and the RESP calculator to help your client discover winning strategies on how they can maximize their child’s RESP… because the sooner they invest, the faster it grows! First Time Home: With inflation and the affordability of home ownership being top of mind, many parents are wondering how they can help their child create savings for when this pricey milestone approaches. Some considerations that your client can take into account: In-trust-For savings accounts (ITF) – Once an ITF is opened, as trustee, you can make contributions or investments into the account on your child’s behalf, but you must use any withdrawals for their benefit. Then, once they reach the legal age of majority in the province in which they live, they are entitled to the account’s proceeds. Downsizing – when your child leaves the nest, you may be able to downsize the family nest and gift some proceeds to your child to help them get a head start in purchasing their own home. Life insurance products – There are a number of future financial advantages and guarantees to explore when you purchase permanent life insurance for your child. And, until you decide if and when to pass along the asset to your child, you have full ownership over the policy and its cash values. Insurance As A Financial Tool Life insurance products can help secure a child’s future insurability, as well as leverage the unique attributes of insurance to create a tax-advantaged asset that can be accessed in the future. Below are a few key considerations regarding juvenile life insurance and how it can offer your client financial solutions for their child. Securing insurability – many juvenile insurance policies will allow benefits to grow over time. Securing the insurance contract will guarantee that the policy will payout at a later time, regardless of the child’s health in the future, including what they may face as adults. Unique asset – these policies can generate significant values which can be accessed at various times by the policy owner and exempt life insurance policies, that children can qualify for, will grow without the result of annual taxation! Fixed cost – these plans are often set with a fixed number of payments which either parents or grandparents can fund. Likewise, critical illness (CI) insurance coverage provides unique protection and asset qualities. Comprehensive coverage – critical illness insurance pays while clients are alive. Also known as living benefits, these policies typically cover a large number of illnesses and conditions (including the major three: cancer, heart attack and stroke). Child CI policies not only cover the 25 conditions in full, but also a number of child-related illnesses. Unique asset – many child CI policies have unique return of premium options, which will allow the policy owner to receive a lump sum return of premiums paid if the benefit has not been used, allowing the policy and its coverage to continue! Looking for more information to share with your clients on the financial benefits of insurance? Be sure to share articles Choosing Insurance that Grows with You and Do Younger Canadians Need Insurance?, as well as the Exploring Your Life Insurance Options tool, because knowledge is power. *Some provinces offer additional incentives or grants.  Please contact us to learn more.

Did you know that September is National Life Insurance Awareness Month? The perfect time to reach out to prospects and clients to evaluate what insurance they have in place and if it still meets their needs. A good place to start is to assess your client’s current situation. Your client has different needs at different stages in their life, so good questions to review with them include: How has life changed since you purchased your coverage, or since we last reviewed your insurance: Find out about mortgages, new loans, job or income changes, education funds, retirement plans and other financial obligations so they can be sure they have the coverage they need. Has the nature of your needs changed: They may require a similar coverage amount as when they first purchased their plan, but their obligations may have shifted from temporary to permanent. A change of plan may be appropriate. Have you done any will planning: What are your hopes and dreams for your heirs: There may be an insurance need associated with the smooth distribution of their estate. Regardless of your client’s life insurance needs, they have options. So, as it gets chillier outside and we prepare for the long, cold Canadian winter ahead, take some time today to reach out and ensure that your clients have the insurance coverage they need today and into the future. Share the client article so that, in honour of life insurance awareness month, your prospects and clients can ask themselves a few good insurance related questions. If you’re looking for similar content to share with your clients, read/watch then share Insurance Solutions for Today and Tomorrow, CIDI: Enhancing Your Client’s Benefit Package, as well as the INFOclip: Building Lifetime Protection video. We also have this great Exploring Your Life Insurance Options tool to help your client understand the varying types of insurance and which one may be best for them.

Melanoma is the deadliest form of skin cancer. About 9,000 Canadians are diagnosed annually causing approximately 1,200 deaths per year (1). As a cancer long known to plague mankind, the father of Western medicine, Hippocrates, described these potentially deadly skin lesions as “the fatal black tumour”. For millennia, there was a poor understanding of the causes and possible treatments. That changed in the 19th century when physicians noted the propensity of melanoma to metastasize and later how excising certain lymph glands might prevent the spread of this skin cancer (2). The name melanoma derives from the uncontrolled proliferation of melanocytes, cells that produce pigment in both the skin and eyes. For this reason, melanomas can also be diagnosed in the eyes (ocular melanoma). Once a rare form of cancer, the worldwide incidence of melanoma continues to increase at a pace of 4-6%  yearly (3). This means 325,000 new cases globally in 2020 that will rise to 510,000 cases by 2040. Like many cancers, melanoma is more common among older lives, but not always. The legendary reggae singer, Bob Marley, succumbed to this illness when only 36 years old. Underwriting impact How does melanoma impact underwriting? More experienced underwriters will remember that the depth of invasion into the skin layer by layer, as enumerated by Dr. Wallace Clark more than 50 years ago, was the most important consideration. Tumor penetration only to the uppermost region of the skin, the epidermis, offered the best outcomes. Involvement of the subcutaneous tissue, the deepest skin layer was usually associated with the worst prognosis (4). Since Dr. Clark, tumor thickness (measured in millimetres) is thought to be the most important prognostic factor. Mortality data shows almost no excess mortality for lesions under 0.8 millimetres and progressively increasing mortality over this thickness. It takes about 10 sheets of paper piled on top of each other to achieve a millimetre of thickness. Microscopic analysis also reports if there is ulceration in the lesion, the rate of tumor cell division and more, making the pathology report the key underwriting requirement. Prevention and treatment Family history and genetics contribute to the risk of developing melanoma. The major preventive action is managing sun exposure. A good example is the public awareness campaign in Australia and New Zealand that began in the 1980’s, encouraging the public to Slip-Slop-Slap. This mnemonic was a catchy slogan to slip on a shirt, slop on sunblock and slap on a sun hat. The effect has been largely positive, with melanoma rates decreased in younger people, though the more elderly continue to have higher melanoma rates, likely the combination of age and lack of awareness of sun-blocking in their youth (5). Surgical removal remains the cornerstone of melanoma treatment. Sometimes a second surgery is performed to ensure the margins around the melanoma are clear of tumor cells. A pioneering technique called sentinel lymph node biopsy is now commonly used with a chemical dye to determine if the melanoma has spread, sparing the painful harvesting of multiple nodes when the sentinel node is negative and to select patients who might benefit from adjuvant therapies (6). PPI’s Advanced Underwriting team will continue to keep an eye on developments in the understanding, treatment and underwriting of melanoma. Canadian Cancer Society. Melanoma Skin Cancer Statistics. Cancer.ca. May 2022. Alix-Panabieres, Catherine, et al. Detection of cancer metastasis: past, present and future. National Library of Medicine. February 2022. Matthews, Natalie, et al. Epidemiology of Melanoma. National Library of Medicine. December 21, 2017. Clark’s Level. n.d. Slip-Slap-Slop. n.d. Reintgen, D., et al. The orderly progression of melanoma nodal metastases. National Library of Medicine. December 1994.

It may seem like an easy decision for your clients to invest in guaranteed return investments when rates are high, but it’s important not to lose sight of inflation. The objective, after all, is to increase purchasing power through earning at a rate higher than inflation. If inflation is, say, 5% but interest rates are also 5% then the real interest rate is 0% and there is no increase in purchasing power. Increasing purchasing power can often involve taking on some level of risk. Your clients may benefit from exploring the value of taking risks with different types of investments that offer varying risk profiles or tax treatment. Try the tools in The Value of Taking Risks and share them with your clients to help them learn more about the value of taking risks, and get the conversation started.