What role does life insurance play in a high-net-worth family's wealth planning?
At significant levels of wealth, life insurance is no longer income replacement; it's an instrument of wealth planning. Death benefits paid to named beneficiaries are generally received tax-free, which allows a well-structured policy to:
- settle the estate's tax liability without the forced sale of family assets or businesses
- equalize inheritances between heirs who assume the business and those who don't
- endow a lasting charitable legacy
When held within a corporation, proceeds can often flow to the family with exceptional tax efficiency through the Capital Dividend Account. For many business owners, it's among the most effective means of transferring wealth.