Corporate Owned Life Insurance

A corporation may own life insurance to:
-fund a buy/sell agreement
-as collateral for a loan
-to cover the loss of a key employee
-paying tax at death
-to cover losses incurred as a result of a key employee or shareholder becoming critically ill.

Advantages of corporate owned life insurance:
-lower after-tax cost premiums
-increased flexibility in buy/sell situations
-possible collateralization (could be a source of cash)
-less cumbersome in a multiple shareholder case
-shareholder preference for spending corporate rather than personal dollars
-increased assurance that funds are available to pay required premiums and they are paid on a regular basis

Tax implications of corporate owned life insurance:
-potentially deductible when used as collateral for a business loan
-potentially deductible when the premium is consider a taxable benefit received in an employment context
-net proceeds received at death can potentially be paid out tax free using the CDA capital dividend account

E&O consult professional advice for your situation

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