Owning segregated funds within a corporation

Recently, I was approached by an advisor about how segregated funds could be owned inside a corporation.

The proper set-up is to name the corporation as owner and beneficiary and have a shareholder be the annuitant. For example, a doctor’s professional corporation would be the owner and beneficiary and the doctor would be the annuitant.

If this doctor was thinking about a retirement plan, using his corporation’s money he/she could either dividend money to him/herself and invest it or invest the corporate money for future distribution.

For example, if the corporation has $500,000 in cash and it was dividend-ed out to the doctor, assuming the doctor is in the highest tax bracket, approximately $300,000 after taxes would be left for the doctor to invest. Or leave the $500,000 in the corporation and invest it. Obviously, given the same investment and the same time invested, the $500,000 would grow to a lot more than the $300,000.

There is obviously a lot more that can be taken into account when a business owner is contemplating their investment choices and possibly corporate owned life insurance. However, to put it simply, would you rather have $500,000 or $300,000 to invest?

Manulife has excellent resources on this topic. If you’d like to learn more, please let me know.

Take care,

Scott Edgington

Director of Wealth

Qualified Financial Services


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