Minimizing Estate Tax

An Overview of ZLC’s Virtual Update for Professionals on June 8, 2021

We know that it takes a team to generate the best results, and at ZLC we are constantly seeking innovative ways to share our financial expertise with accountants, lawyers, and other professional advisors who continue to partner with us for over 75 years, providing the best quality advice to clients.
One of the avenues we use to share relevant information about the financial industry is our ZLC Update for Professionals Seminars. Our last edition of the event was held virtually on June 8th and covered strategies to minimize estate taxes.

We heard from three speakers about the value of corporate-owned life insurance for estate planning, and some strategies that can be utilized to incorporate corporate owned-life insurance.

James MacGowan, CPA, CA – a speaker at the ZLC event and a recently retired senior partner at one of the Big Four accounting firms – has helped clients with estate planning using insurance for many years. He “loves life insurance” because he explains that it is one of the last few remaining tax-preferred vehicles for investments left in Canada. Insurance is useful not only for providing the liquidity needed on the death of a shareholder, but can reduce that tax liability as well.

Some of the strategies James discussed included:

  • using insurance to redeem corporate shares given to charity on death;
  • combining the purchase of an annuity with life insurance to reduce the overall value of shares in the company while still receiving the benefit of the insurance in the company on death; and
  • using an insurance holding company as part of a typical estate freeze to achieve even more tax benefits.

When structuring life insurance in a company, it is important to remember that it is a long-term asset and consideration should be given to owning it in a holding company rather than an operating company where there is a possibility that the operating company may be sold in the future. Life insurance can be considered an asset in replacement of some of the fixed-income portion of a portfolio. When investments are kept in the policy, they grow tax-free, meaning that life insurance is much like a “TFSA on steroids”.

Farzin Remtulla and Garry Zlotnik, both CPAs and advisors at ZLC, focused their presentations on:

  • reasons why corporate-owned life insurance is a cost-effective and tax-efficient tool to create liquidity for the purpose of funding capital gains taxes that are often faced by business-owners on the shares of their private companies on their demise;
  • advantages that corporate-owned life insurance has compared to investing a corporation’s retained earnings in alternate investments classes; and
  • compared-corporate owned life insurance to other potential sources of liquidity that may be available to fund the capital gains tax.

For situations where corporate-owned life insurance is determined to be the most efficient means of providing liquidity to an estate, but where the insurance premiums compete with other cash needs of a business, Garry and Farzin discussed an insurance financing arrangement. This arrangement involves the purchase of a life insurance policy where the life insurance policy is then used as a collateral asset to borrow back an amount up to the premiums paid. This effectively reduces the annual cost of insurance to the after-tax cost of interest on the loan.

Farzin and Garry showed some examples that they had done for previous clients and how the numbers illustrate significant tax savings and a compelling return on investment.

The ZLC team can assist you (or your clients) in reviewing the liquidity needs of your estate and in finding cost-effective and tax-efficient strategies to address those needs. If you would like to speak to one of our advisors about this topic and how we can provide assistance, please contact us at

DISCLAIMER: The information contained here is of a general nature and is not intended to address the circumstances of any particular individual or entity. This content is not intended to provide specific personalized advice, including, without limitation, investment, insurance, financial, legal, accounting or tax advice; and any reference to facts and data provided are from various sources believed to be reliable, but we cannot guarantee they are complete or accurate; and the information contained herein is subject to change without notice.
Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


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