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

  1. Buy a permanent life insurance policy on the life of a child
  2. 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
  3. 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)

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