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Leaving a Legacy

Your legacy in retirement

You’ve invested a lot of your time on your retirement plan, and all that planning has paid off. You’re confident you’ll have a solid income for your retirement. In fact, it looks like you actually have some extra income or savings right now that you won’t actually need for your retirement. The question is, how do you pass some of this current wealth on to the next generation, or to a charitable organization?

A typical strategy in this case would be to put the extra money into your savings, or a GIC to try to get it to work as hard as it can for you while you have it. The money you save now will be earmarked for your beneficiaries. Unfortunately that growth will also be taxable to you for as long as you have it. In some instances, extra growth on your savings could actually result in a reduction of your OAS benefit.

Of course, some of your funds can be sheltered from taxation using a tax-free savings account (TFSA). But here’s something different to consider. It’s called an Estate Bond. It’s geared to those who have extra income and a desire to leave a legacy upon their death. It’s a simple and extremely effective estate planning concept that has been available for a long time, but not often used. The objective is to maximize the amount that will be distributed to your beneficiaries, while creating a large tax-free legacy for them.

The idea of an Estate Bond is to use some of your additional income or savings to fund an insurance policy. The funds you use to pay premiums will multiply the size of your legacy, and will remain tax-free now and in the future. The Estate Bond strategy transfers non-registered, taxable savings into a tax-exempt insurance policy. As you over-fund the policy, a cash value also accumulates. This is eventually paid out entirely tax-free, along with the original face-value of the policy, to your beneficiaries when you die. This will help you maximize the amount you transfer to your beneficiaries, and minimize the amount of tax you pay.

This same strategy can be implemented with the excess capital you have stored in your corporate accounts. If you have funds in your corporate account, and you are looking for an efficient way to extract this money without bringing it into your income and paying tax (and possibly losing some of your OAS benefits), you should consider a Corporate Estate Bond.

Talk to your ACU financial advisor this year to ensure you are doing the right things with your plan.


Credential Financial Strategies Inc. offers financial planning, life insurance and investments to members of credit unions and their communities. This article is provided as a general source of information and should not be considered personal advice. Please speak to your Credential Financial Strategies Representative or personal financial representative before making any financial planning decision or implementing any strategy.

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