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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

416-786-4140

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