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The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

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Freedom 55 Financial is a division of The Canada Life Assurance Company and the information you requested can be found here.

Estate planning with life insurance

Key takeaways

  • Life insurance is often used in estate planning to replace income, transfer property and other needs.
  • Different types of life insurance can be used for different estate planning needs.

How life insurance can help in estate planning

Along with your will, your estate plan is simply your plan to distribute everything you own to people or organizations, after you die.

Life insurance is often used in estate planning in 2 ways:

  • To help replace your lost income for those you leave behind
  • To help preserve and transfer your estate

The ways life insurance is used in estate planning

There are several ways life insurance can be used in estate planning:

Help cover final expenses

This would include funeral costs, legal and executor costs.

Replace income

Especially when you’re younger with a family who depends on your income, a life insurance death benefit can help your dependents pay for living expenses, mortgage, debt, etc.

Preserve your assets

Naming beneficiaries on your life insurance can help you manage taxes and probate fees so more of your inheritance gets to your heirs. Probate is the court procedure to formally approve a will as the last valid will of a deceased person, and formally confirm the appointment of someone who’ll act as the executor of the person’s estate.

You can also use life insurance to cover the capital gains tax on a vacation property you intend to keep in your family.

Leave money to charity

Life insurance is a one of the most cost-effective methods of giving to a charity who will receive the death benefit from your policy after you die.

Business succession planning

Life insurance is also often used to divide business ownership to surviving partners after 1 partner dies, by using a buy-sell agreement to provide money for the other partners to purchase your share. 

Using different types of life insurance in estate planning

There are several different types of life insurance that can be used in different ways in estate planning.

Term life insurance

This type of insurance provides temporary coverage that provides the people or charities you name with a tax-free payout if you die within the term you choose. It’s often used to cover a mortgage or keep a business running.

Get a quote for flexible and affordable Canada Life My Term™ life insurance plans that help protect the ones you love.

Permanent life insurance

This type of life insurance, which includes universal life insurance and participating life insurance provides coverage for your entire life, so it’s often a better option for estate planning with life insurance.

Canada Life My Par Gift life insurance is specifically designed for charitable giving and allows donors to make a bigger impact with the charitable donation they make during their lifetime.

Employee life insurance

With this type of life insurance, an employer pays the premiums for a life insurance policy when the employee meets the eligibility criteria. Following a death, a lump sum is paid to the employee’s beneficiary. This money can be used to help cover funeral costs, outstanding debts or loss of crucial income. 

It's important to note this type of coverage only provides a set amount of coverage which may or may not provide enough coverage to meet your estate planning needs.

It also only covers you while you’re employed. However, if you have Freedom to Choose™ life insurance, you can take your life insurance with you. 

Joint last-to-die life insurance

This way to purchase insurance covers 2 people and pays a death benefit only on the second person’s death. This means if 1 person dies, the policy won’t provide immediate financial support for a family. It’s often used for estate planning by couples or business partners.

Joint last-to-die insurance is usually less expensive than 2 individual life insurance policies making it a more cost-effective option to help protect an estate. 

What's next?

Now that you know more about estate planning with life insurance, you may choose to meet with an advisor, or if your workplace benefits are with Canada Life, contact a heath and wealth consultant to:

  • Determine if your life insurance provides enough coverage for your end-of-life expenses and other financial needs.
  • Start building your estate plan.

The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. 

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