Strategies to Build, Protect, and Transition Business Wealth

As a business owner, once you’ve built a profitable company and maximized registered accounts, the focus shifts to preserving wealth, reducing tax, and planning for succession. Insurance—when used strategically—can be a powerful corporate and estate planning tool. 

Insured Retirement Plan (IRP) 

An IRP uses a permanent life insurance policy inside your corporation to grow cash value tax-deferred. In retirement, you borrow against the policy to access funds without triggering personal tax, and the loan is repaid from the death benefit. The remaining payout flows into your Capital Dividend Account (CDA) for tax-free distribution to shareholders. 

Example: A corporation with $500,000 in surplus retained earnings funds an IRP. At retirement, the owner borrows $50,000 annually from the life insurance policy for income, tax-free. When they pass away, the loan is repaid from the policy, and the balance is paid into the CDA for tax-free distributions to shareholders.

Corporate-Owned Life Insurance (COLI) 

COLI protects the value of your company and provides tax-free liquidity when it’s needed most. The corporation owns the policy, pays the premiums, and receives the tax-free death benefit, which can fund buyouts, cover capital gains tax, or stabilize cash flow during succession. 

Example: Two partners have a buy-sell agreement. The company owns a COLI policy on each of them. If one passes away, the death benefit funds the share purchase without touching company reserves or selling assets. 

Estate Preservation & Equalization 

This strategy ensures fairness when passing on illiquid assets like a business or real estate. Life insurance creates liquidity to pay taxes, settle debts, or balance inheritances without forcing asset sales. 

Example: A business owner leaves the company to one child who works in it. A life insurance policy provides a tax-free payout to the other child, so each receives an equitable inheritance without splitting or selling the business.  

Why It Matters for Owners  

When integrated into your plan, insurance can provide tax-efficient retirement income, protect your company through ownership changes, and preserve more of your estate for your family or shareholders.  

With the right structure—it becomes a business tool, not just a safety net. These are the kind of structures our Advisor team puts in place for Business Owners. Reach out to learn more!