Children are full of immeasurable potential - but they often need financial resources to make their dreams come true. Aspiring professionals need to finance years of schooling. Future entrepreneurs need start-up capital. Everybody needs a home, and real estate doesn't come cheap.
There are many ways to help build a foundation for a child's or grandchild's financial future. One innovative strategy is to purchase insurance that increases in value over time. This approach uses a permanent life insurance policy to facilitate the tax-efficient transfer of wealth between generations.
Here's how is works:
- Purchase a permanent life insurance policy on the life of a child or grandchild
- As the owner, choose to top up the premiums to build cash value
- Transfer ownership of the policy to the child or grandchild at or after age 18
As long as certain specific Canada Revenue Agency requirements are met, the transfer can qualify as a tax-free rollover. After the transfer, the child or grandchild can name a new beneficiary and access the cash value to meet current or future cash needs, such as paying for post-secondary education or purchasing a new home.
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