Kickstart Your Corporation

Chapter 4Valuing Permanent Insurance on the Holistic Corporate Balance Sheet

In my experience as a financial advisor, I've discovered that discussions about insurance—specifically, permanent insurance—can inspire some of the most passionate and deeply held beliefs.

Some people believe wholeheartedly that no one, ever, should purchase permanent insurance, whereas others believe just as fervently that insurance can play a critical role on your personal balance sheet for tax, financial planning, and risk management benefits.

In this chapter, we review a specific strategy for the use of insurance: corporate-owned permanent life insurance. This is a narrower discussion than the more general review of insurance that follows in Chapter 4, Risk Management.

What You'll Get Out of This Chapter

For the incorporated professional or owner–manager, the use of corporate-owned permanent life insurance is one of the most powerful—and most tax-efficient—ways to build wealth and create and protect estate value. But this strategy is frequently decried as expensive, inappropriate, and motivated by considerations other than the best interests of the potential purchaser, among other criticisms.

In this chapter, we provide a careful review of the assumptions, benefits, and qualifications associated with the use of corporate-owned permanent life insurance, especially in light of new rules for the taxation of passive income inside corporations.

We review each of the strategy's claimed benefits and ...