You have sizable amount built up in your Registered Retirement Savings Plan (RRSP) or your Registered Retirement Income Fund (RRIF). What happens if you die before the money is used up? If you have a spouse, the money can be transferred tax free, but when your spouse passes away, your heirs stand to lose up to half the money to taxation.
How To Solve The Problem:
You can protect the entire balance of your RRSP or RRIF by using life insurance. A death benefit from a life insurance policy is not taxable. All you need to do is to purchase enough coverage to protect the amount of your estate value that would be paid to Revenue Canada. The benefit far outweighs the cost.
For example: You have a RRIF Balance of $200,000 in the year of your death. If we assume Revenue Canada taxes this amount at a rate of 50%, your heirs would have to write a cheque for $100,000 to cover the tax.
If however, you have a life policy that paid a tax free death benefit of $100,000 your total balance would now be restored to $200,000.
You can now enjoy the full value of your life’s work and pass your own estate, intact to your heirs.
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