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 In a 2009 case, Ribeiro v Braun Nursery Ltd., a corpor- ation that purchased a life insurance policy on an em- ployee’s life chose not to issue capital dividends on the redemption of the deceased employee’s shares, leaving the employee’s estate with a significant tax liability. The shareholders’ agreement didn’t specify that the deceased’s shares be redeemed using capital dividends; the court thus concluded that the corporation had met its obligations under the shareholders’ agreement.
ponding deduction to the corporation. Even if a business won’t be sold,
when the owner dies and there’s a deemed disposition of shares, the owner may want to ensure the estate can qualify for the capital gains exemption, Campagna says. One recommended solution is to hold the insurance in a holding company or a operating company. IE
client’s ability to claim the capital
gains exemption, but the policy
would also require a transfer from the
corporation to the owner before the
business is sold, which can be signifi-
cantly tax-ineffective, Campagna says.
The transfer would result in a taxable
benefit to the shareholder equal to the
fair market value of the policy, which
may be higher than the policy’s cash value, he says, with no corres- sister company rather than the
   QUIZ: Insurance and the business owner
         Complete it at
                   1 Corporately owned insurance
proceeds must be paid out of the capital dividend account.
explicitly addressed concerning a buy/sell agreement funded with insurance?
A Whether the insurance policy’s proceeds will be used to buy a deceased business partner’s shares
B Whether capital dividends will be issued to buy a deceased business partner’s shares
C Both A and B
D None of the above
Appointment Notice
4 Discussing the details of a buy/sell
agreement with your business-owner client is a good way to:
A Connect with the client’s accountant and lawyer
B Help prevent drafting errors and omissions
C Ensure the terms and objectives of the shareholders’ agreement co-ordinate with the client’s will
D All of the above
E None of the above
5 Key person coverage includes:
A Government- mandated costs, such as a payout to the key person’s family
B Hiring costs to replace the key person, such as a finder’s fee and signing bonus
C Losses associated with tasks performed by the key person
D Both B and C
E All of the above
6The amount of key person coverage varies but is typically
equal to:
A 5–10× compensation
B 4× compensation C 2× compensation D 1× compensation
7 When considering using insurance to
manage passive income levels, an advisor should ask a business owner about:
A Their plans for the corporation’s retained earnings
B The passive income rules
C Whether the corporation’s retained earnings are notional
D None of the above E Both A and C
In addition to
risk management and wealth planning, insurance can be used for tax planning.
True False
9 By buying life insurance with
retained earnings, a business-owner client can avoid tax on passive income at the top marginal rate, as well as clawback of the small- business deduction, which starts at $50,000 of passive income and is clawed back completely at $200,000.
True False
10 A corporation could run afoul
of the tax rules for qualified small-business corporation shares if it owns insurance with a high cash value.
True False
11 An advisor can be perceived as a
problem-solver by:
A Assuming a client requires insurance to address liquidity needs
B Posing questions to clients
C Presenting one type of insurance to clients
D None of the above
Advisors should
2 An important service that
an advisor can perform related to
a buy/sell agreement is confirming that the agreement is signed.
  3Which of the fol- lowing should be
                    Jean-François Chalifoux, Chief Execu- tive Officer of SSQ Insurance has been elected Chair of the Board of Directors of the Canadian Life and Health Insurance Association (CLHIA).
Founded in 1944, SSQ Insurance is now one of the largest insurance compa- nies in Canada, with $13 billion in assets under management.
Jean-François holds a bachelor’s de- gree in actuarial sciences from Laval University, is a Fellow of both the Cana- dian Institute of Actuaries and the Casu- alty Actuarial Society, and is a graduate of the Queen’s Executive Development Pro- gram. Prior to joining SSQ Insurance in 2015, he held several executive roles with major Canadian insurance companies.
The CLHIA is a voluntary association whose member companies account for 99 per cent of Canada’s life and health in- surance business. The industry provides
a wide range of financial security prod- ucts such as life insurance, annuities (in- cluding RRSPs, RRIFs and pensions) and supplementary health insurance to al- most 29 million Canadians. It also holds over $850 billion in assets in Canada and employs more than 156,000 Canadians.
testing their business- owner clients’ corporate structures, shareholders’ agreements and liability funding amounts so that planning isn’t undermined.
True False
refrain from periodically stress-

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