Disclosure. I am a licensed Financial Security Advisor, Mutual Fund Representative, and Group Insurance & Annuity Plans Advisor. I am not a lawyer, tax lawyer, or accountant. I discuss taxes only as they relate to specific insurance, investment, and estate strategies; I do not provide general tax optimization or comprehensive financial planning. Content is educational only. Mutual funds offered through WhiteHaven Securities Inc. Insurance products offered through iAssure Inc. Coordinate decisions with your CPA, notary, or lawyer. See Disclaimer and Privacy.
Why this is important
The corporation is a transitional tool. It allowed you to generate and store wealth, but the ultimate receiver of the fruits of your labor must be the family. Extraction must be planned so the accumulated value reaches its proper destination.
Planning early for estate extraction provides incomparable opportunities for minimization of the share of CRA and maximization of the legacy you leave to the family.
All numbers are from an insurance carrier illustration and are projections based on stated assumptions. This is an illustrative example, not a guarantee of outcomes.
How a business owner could use corporate-owned life insurance to transfer wealth to beneficiaries more efficiently than a traditional investment account
Estate Extraction with Universal Life Insurance | Samuel's Case Study
Client Profile: Samuel
Background
Age
45 years old
Health Status
Non-smoker, healthy
Goal
Maximize wealth transfer to beneficiaries
Financial Situation
Company Status
Holding company with surplus cash
Available Capital
Significant retained earnings
Investment Capacity
$50,000 annually for 10 years
Investment Profile
Risk Tolerance
Aggressive investor
Assumed Rate of Return
9% (regular account) / 8% (UL policy)
Residence
Quebec
Tax Environment
Corporate Tax Rate
50% on passive income
Individual Dividend Tax Rate
38%
Priority
Tax efficiency and family legacy
The Comparison
Two approaches for investing the company's surplus cash were analyzed
Option 1: Regular Investment Account Owned by HoldCo
Investment Structure
→Annual contribution: $50,000 for 10 years
→Total invested: $500,000
→Expected return: 9% annually
Breakdown of Expected Return
→Interest income: 1%
→Dividends: 10%
→Deferred capital gains: 50%
→Realized capital gains: 39%
Key Challenge
Annual taxation reduces compound growth. At death, remaining gains trigger capital gains tax, and dividends to heirs are taxable.
Option 2: Investments Sheltered Under Universal Life Owned by HoldCo
Policy Structure
→Annual premium: $50,000 for 10 years
→Total invested: $500,000
→Death benefit: $1,000,000 + Fund Value
→Expected return on investments: 8% annually
Tax Treatment
→Annual tax on growth: $0 (Tax-Deferred)
→Death benefit to corporation: Tax-Free
→Increases Capital Dividend Account (CDA)
→CDA dividends to heirs: Tax-Free
Key Advantage
Zero annual tax allows full compound growth. Death benefit creates CDA credit for tax-free distribution to beneficiaries.
Assumptions
This illustration assumes 9% annual returns for the regular investment account and 8% for the universal life policy (1% lower). Despite the lower assumed return, the UL policy delivers more to beneficiaries due to tax-deferred growth and tax-free distribution. The life insurance policy has insurance costs deducted from the fund value, while the regular investment has annual taxes on interest, dividends, and realized capital gains. Both scenarios use Quebec tax rates.
Projected Results
Net estate value (after-tax) at key milestone ages
After-Tax Estate Value Over Time
Comparing $50,000 annual investment for 10 years (Total: $500,000)
Source: BMO Life Assurance Company illustration, January 2026. This is illustrative only and not a guarantee of future results.
At Age 65
20 years of growth
Regular Investment (9%)
$1,269,868
Universal Life (8%)
$2,717,532
Advantage
+$1,447,664
114% more to beneficiaries
At Age 80
35 years of growth
Regular Investment (9%)
$4,122,730
Universal Life (8%)
$6,171,779
Advantage
+$2,049,049
50% more to beneficiaries
At Age 90
45 years of growth
Regular Investment (9%)
$8,812,592
Universal Life (8%)
$10,983,603
Advantage
+$2,171,011
25% more to beneficiaries
At Age 100
55 years of growth
Regular Investment (9%)
$18,689,647
Universal Life (8%)
$22,309,354
Advantage
+$3,619,707
19% more to beneficiaries
Key Insight
Even with a 1% lower assumed return (8% vs. 9%), the universal life insurance strategy consistently delivers more to beneficiaries at every milestone. The advantage is most dramatic in the early years (114% more at age 65) because of the death benefit. As the portfolio grows larger, the percentage advantage decreases but the dollar advantage continues to grow, reaching over $3.6M by age 100.
How the Corporate Asset Transfer Strategy Works
The strategy uses corporate-owned universal life insurance to transfer wealth tax-efficiently
1
Policy Purchase & Ownership
The holding company purchases a universal life insurance policy and names itself as both the owner and beneficiary. The policy provides $1,000,000 in permanent life insurance coverage on Samuel, plus an investment component that grows tax-deferred.
2
Funding the Policy
The company contributes $50,000 annually for 10 years (total: $500,000) into the policy. These funds are allocated to investment accounts within the policy. In this illustration, funds are allocated to equity-focused options with a projected 8% return on investments.
Note: Insurance costs (cost of insurance, premium tax, admin fees) are deducted from the fund value. These costs vary by age, health, and policy design. This illustration uses a YRT (Yearly Renewable Term) cost structure.
3
Tax-Deferred Accumulation
The investments grow completely tax-deferred inside the life insurance policy. Unlike a corporate investment account where interest, dividends, and realized gains are taxed annually, there is no annual tax on growth inside the policy.
Regular Investment Account
9% gross return Taxed annually on income = Reduced net growth
Universal Life Policy
8% growth (less insurance costs) No annual taxation = Full compound growth
4
Death Benefit Received Tax-Free
When Samuel passes away, the corporation receives the death benefit (face amount plus fund value) completely tax-free. This creates a credit to the company's Capital Dividend Account (CDA) equal to the death benefit minus the policy's adjusted cost basis.
5
Tax-Free Distribution to Beneficiaries
The company can now distribute funds from the CDA to the shareholders (Samuel's beneficiaries) as tax-free capital dividends. The beneficiaries receive the full value without paying any personal income tax.
The Complete Tax Advantage
No tax during accumulation + No tax on death benefit + No tax on CDA distribution = Maximum wealth transfer to family
Key Takeaways
What this case study demonstrates
Tax Efficiency Matters
Even with a 1% lower assumed return (8% vs. 9%), tax-deferred growth and tax-free transfer create substantially better outcomes for beneficiaries at every milestone.
Death Benefit Accelerates Value
The $1M death benefit creates immediate value for beneficiaries, especially in earlier years. This is why the advantage is 114% at age 65 but decreases as portfolios grow.
Long-Term Focus Required
This strategy is for wealth transfer, not liquidity. The funds are designed to stay in the policy until death. Business owners who may need access to the cash should consider other options.
Important Considerations
•This is an illustrative case study; actual results will vary based on investment performance
•Tax rates and regulations are subject to change
•Life insurance requires underwriting and insurability
•The policy must be structured properly to comply with tax-exempt rules
•Coordinate with your CPA, lawyer, and insurance advisor
Is This Strategy Right for You?
This strategy may be appropriate for:
Business owners with surplus cash in holding companies
Those seeking tax-efficient wealth transfer to beneficiaries
Individuals in good health who can qualify for insurance
Those prioritizing family legacy over current liquidity
Investors with long-term planning horizons (20+ years)
Illustration Assumptions & Source
Policy Details (Universal Life)
Product: Universal Life Insurance (Wealth Dimensions)
Face Amount: $1,000,000
Plan Type: Single life, Yearly Renewable Term (YRT)
The YRT cost structure has both benefits and risks. Benefits: Insurance costs are very low in the early years, allowing more capital to remain in the policy and compound over time. Risks: Costs increase as the insured ages. If investment growth underperforms, the policy could require higher deposits for a longer period to remain in force. The regular investment account doesn't have this risk; it simply suffers the impact of lower returns without requiring additional deposits to stay open.
Source: BMO Life Assurance Company, Wealth Dimensions CATP V56.0/25-04, Corporate Asset Transfer Plan Illustration, January 2026. This illustration is for educational purposes only and is not a guarantee of future results.
Want to See Your Own Numbers?
Every situation is different. I can run a personalized illustration based on your age, health, and goals.
Life Insurance, Estate Strategies, Corporate Investing, Tax Strategies
Full Disclosure.
This content is for information and education only. It explains general concepts that may apply to incorporated business owners, but it is not personalized tax, legal, or investment advice.
Tax Considerations:
Tax rules are complex and subject to change
Strategies and benefits depend on your specific circumstances, province, and business structure
Always consult with a qualified CPA before implementing any tax strategy
Provincial variations in rates and rules may apply (Québec vs. Ontario differences exist)
Past tax treatment does not guarantee future treatment
Investment Considerations:
Investment strategies do not guarantee superior returns
Tax efficiency is one factor; risk, fees, and total returns all matter
Past performance does not guarantee future results
All investments carry risk of loss
Regulatory:
Mutual funds are offered through WhiteHaven Securities Inc.
Insurance products and certain other services are provided through iAssure Inc., an independent firm in the insurance of persons and in the group insurance of persons
These activities are neither the business nor the responsibility of WhiteHaven Securities Inc.
Professional Advice:
This article is not a substitute for professional advice from your CPA, lawyer, or financial advisor
Work with your professional team to understand how these concepts apply to your specific situation
For personalized advice, a formal engagement and suitability review are required
