How the Estate Bond® Works

Your situation

You have savings or extra income that you do not need for lifestyle purposes. You invest the cash in GICs or other taxable investments and earmark these investments for your heirs or favourite charity. You want a financial planning
strategy that will increase the funds available when you die.

An option to consider - the Estate Bond®

This financial planning strategy requires you to use your surplus cash to purchase a life insurance policy. By replacing the taxable investments with a life insurance policy, you will increase the funds available to your heirs when you die and reduce the amount of tax you will pay today and in the future.

How does the Estate Bond® work?

You purchase a life insurance policy on your life and you name an heir or favourite charity as the beneficiary of the policy. Depositing more funds into the policy than you need to pay the policy charges creates cash value. This cash value accumulates on a tax-deferred basis, increasing the death benefit payable under the policy. When you die, your beneficiary receives the proceeds of the policy, tax free.

By taking advantage of the Estate Bond®, you have moved personal investment dollars from a tax-exposed environment to a tax-sheltered environment, increasing the amount you give to your heirs or favourite charity when you die.

Estate Bond… A Client Profile

Who is it for?
• individual, Canadian-resident taxpayer
• in good health
• age 45 years and older
• strong desire to leave a legacy at death
• affluent, with surplus funds available to invest
• receptive to long-term planning strategies

Why does it work?
• provides life insurance protection that increases the size of your client’s estate today, and in the future
• creates cash value that grows on a tax-deferred basis, that may increase the insurance benefits payable at death
• reduces the amount of tax-payable while living
• may help reduce estate settlement costs
• may offer protection from creditors

An example …

In this example, your client is a 60-year old female, non-smoker. She wants to leave a legacy for her children when she dies. She plans to invest $25,000 for the next 10 years in a life insurance policy. Her personal tax rate is 45%. By starting with a $500,000 initial death benefit, and assuming a 6% rate of return, here’s how the Estate Bond strategy can increase the size of the gift she’ll leave her children.

Estate Bond

Estate Bond can increase the amount of cash that will go to your client’s heirs by almost $350,000!

Note – The benefits shown above are a summary of some of the benefits reflected in an Estate Bond illustration. Estate Bond illustrations are based on assumptions that are not guaranteed. A change in the assumptions will impact the benefits illustrated under the strategy.

The Tax & Estate Planning Group, Manulife’s highly respected team of legal, life insurance and accounting experts, provides individualized support on complex tax and estate planning issues.