Risk & Business Magazine Cal LeGrow Spring 2016 | Page 30

Bulletproofing the Future
It Begins with Sound Financial Planning

BY: GLEN SEYMOUR, VICE PRESIDENT, CAL LEGROW FINANCIAL SERVICES

F

inancial plans should align with
the goals and objectives of an
organization, and assist with business
operation during both stable and
changing environments. Many financial
plans consider business objectives, the
stage of the business, risk level, and an
investment portfolio - making insurance
coverage a secondary priority.
When an organization considers
bulletproofing itself against times
of sudden and unexpected change,
complete financial planning should be
a key component included in its overall
plan. In addition to wealth management,
consideration should be given to a sound
approach to insurance coverage.
Life insurance is a powerful tool available
to businesses. Similar to the key drivers
for individual coverage, life insurance for
businesses ensures stability in the event
of losing an owner or key decision maker.
Benefits can include:
• Discharging liabilities at death;
• Ensuring survivors are prepared to
keep operating the business after a
death; or
• Assisting survivors in reaching
long-term goals.
There are many planning components
related to insurance that business

owners should consider, including:
• Business continuation in the event
of a death;
• Buy-sell agreements which can
ensure that a deceased business
owner’s heirs receive full value of
the business, while ensuring that
the business partner can carry on
with the business;
• Key person life insurance, which
helps mitigate the loss of income or
impact of increased expenses, as a
result of the loss of a key employee;
• Tax treatment of life insurance
proceeds. Given the fact that death
benefit proceeds to a corporation
are tax-free, a corporately owned
business can put contingency plans
in place without the concern that
taxes will reduce the gross value of
the life insurance proceeds.
Besides using life insurance for
contingency plans, it can also be used as
an investment choice. When a company
has retained profits or surplus cash,
these funds can be used to purchase a
life insurance policy versus investing
in taxable investments. Additional
tax advantages are provided by the
“capital dividend account” mechanism,
which allows most or all of an eventual
death benefit paid to a company to be

withdraw to Canadian shareholders on
a tax-free basis. By carefully structuring
a life insurance investment you can
significantly increase the amount of
funds available to your heirs or a charity
of your choosing.
Disability insurance is another tool
that can be used to replace income in
the event of a key employee becoming
disabled, and unable to earn income.
Disability policies are designed to assist
businesses at times when:
• A key employee becomes disabled;
• The shareholders of a corporation
purchase the interests of a disabled
shareholder under a disability buysell agreement;
• When a business owner becomes
permanently disabled, impacting
expenses associated with running
the business. This insurance policy
is known as overhead expense
insurance coverage.
Although there are various strategies
that may be used when bulletproofing
your business, the startin