Corporate Life Insurance Strategies
There is a double tax trap (capital gains tax and dividend tax ) to taxable investments in the corporation when the owner of corporation dies. There is a deemed disposition when the owner of the corporation dies and capital gains tax is payable . Again dividend tax is payable when the executor of the owner’s will makes payments from corporation to the beneficiary.
If the corporation is the owner and beneficiary, when the proceeds of the life insurance policy are paid to the corporation , the amounts in excess of the policy ACB are credited to the Capital Dividend Account which is a notional account in corporations and provides tax free dividends to owners or their beneficiaries.