Today our guest is Shawn Redford.
Doctors in Canada wanted to be paid more for services, instead of being paid more money, they were allowed to incorporate allowing them to keep more money inside the corporation, and defer the money to retirement, when they would be in a lower tax bracket. It will be worth more down the road. In Canada we have public health care. Many Canadian doctors were moving down to the United States in order to make more money. The government rules changed the taxation on the funds within the corporation.
Now, there is a consequence to the funds in those financial plans, and what are they being told to do?
Any professionals that have a corporation have options available to them, such as individual pension plans, or using life insurance contracts. The life insurance has a dual benefit. The tax shelter allows them to put money away and provides flexibility. Professionals can look at insurance contract, not just for the traditional purposes, but also as a savings vehicle. The insurance contract can have a savings component within the contract, growing tax free. This lowers the tax “spread” and deferring it to later.
As always, please ensure you seek professional advice before making changes or decisions to your financial plan.