Corporate IFA Strategy
1. Client Snapshot
| Item | Details |
|---|---|
| Business Type | Specialized building materials company |
| Location | Markham Ontario |
| Owner | Male, 45 |
| Annual Revenue | ~$2.1M |
| After-Tax Profit | ~$600K |
| Retained Earnings | ~$3.8M |
| Commercial Financing | ~$12M fixed-asset loans |
The company was financially strong but had surplus capital accumulating beyond operational needs.
2. Planning Challenge
- Significant retained earnings but inefficient extraction options
- Desire to maintain business liquidity
- Need for long-term estate efficiency
- Potential balance-sheet strain in the event of unexpected loss of the principal operator
3. Strategy Framework
Implementation Structure (Illustrative)
- Policy type: Corporate-owned participating whole life insurance
- Initial death benefit: ~$5.2M
- Annual premium: $200,000
- Funding period: 20 years
- Financing support integrated through the IFA structure
- Designed to align with corporate cash flow capacity and existing lending framework
IFA Premium funding occurred over 20 years, with lending used to support cash flow stability. From year 21 onward, interest servicing was structured within the lending arrangement.
| Step | Planning Element | Purpose |
|---|---|---|
| Step 1 | Corporate-owned participating life insurance | Long-term balance sheet asset |
| Step 2 | Immediate Financing Arrangement (IFA) | Preserve corporate cash flow |
| Step 3 | Integrated lending + tax planning | Capital structure optimization |
4. Before vs After Structuring
| Planning Dimension | Before Structuring | After Structuring |
|---|---|---|
| Ownership Structure | Corporate surplus idle or invested traditionally | Surplus repositioned into structured insurance asset |
| Growth Allocation | Returns taxed annually | Growth tax-deferred inside policy |
| Retirement Liquidity | Limited without large dividends | Structured liquidity through financing arrangement |
| Tax Exposure at Death | Estate tax burden on corporate assets | CDA credit offsets estate tax exposure |
| Asset Risk Profile | Market and operational risk exposure | Partially shifted to protected insurance structure |
| Estate Transfer Efficiency | Taxable distributions | Large tax-free capital dividend capacity |
5. Financial Outcome (Illustrative, projected to age 90)
Projections are based on current dividend scale assumptions for comparative planning purposes.
| Metric | Projection |
|---|---|
| Projected Death Benefit | $21.84M |
| CDA Credit Created | $21.84M |
| Total Economic Cost to Age 90 | ~$1.09M |
| Loan Balance | ~$6.68M |
| Net Death Benefit After Loan | ~$15.16M |
CDA note (general): At death, a CDA credit is generally created equal to insurance proceeds minus ACB, enabling a tax-free capital dividend to shareholders.
6. Planning Impact
- Estate liquidity created without forced asset liquidation
- Corporate liquidity preserved through structured financing integration
- Corporate capital repositioned into a tax-efficient balance sheet asset
- Long-term economic cost efficiency relative to estate value created
7. Suitability Factors
Professional Summary
This structure illustrates how integrated insurance and financing can be used as a corporate capital structure tool to enhance estate efficiency while preserving operating liquidity.
Next Step
A confidential review can assess whether a similar capital structure approach aligns with your corporate balance sheet, tax profile, and long-term planning objectives, in coordination with your professional advisors.
Book a Private Strategy Review