Cascade Plan
An intergenerational transfer of wealth
Your Situation
You have children or grandchildren. You have nonregistered assets you wish to pass on to them after your death.
Your Goals
You want
- full control of the assets while you are alive
- e.g., for emergencies
- tax-sheltered investment growth
- creditor protection
- to bypass probate fees, lawyer charges and other costs
Your Strategy
- Buy a permanent life insurance policy on the life of a child
- you can also be insured, creating a Joint Last To Die policy
- Name your "child" the contingent owner, as per section 148(8) of the Income Tax Act
- child becomes the policyowner upon your death, bypassing your estate
- if the child has not reached the age of majority, name a trustee instead
- Pay premiums quickly (e.g., over 3-5 years) to maximize the benefit of tax-deferred growth
| Item | Conventional Investment |
|---|---|
| Policyowner | You |
| Contingent owner | Your child or grandchild |
| Investor | You make the deposits |
| Life Insured | Your child or grandchild (and maybe you) |
| Beneficiary | Your child or grandchild |
Your Considerations
Comparison with a Conventional Investment
| Item | Conventional Investment | Cascade Plan |
|---|---|---|
| Tax-free growth | No | Yes |
| Tax-free transfer while alive | No | Yes (as gift) [verify] |
| Tax-free transfer through estate | No | Yes |
| Creditor protection | No | Yes |
| Bypasses estate | No | Yes (no probate, etc) |
page revision: 11, last edited: 10 Aug 2011 11:46