Written by Ron Cooke, President & Founder of Strategic Wealth Protection Partners in Ontario
The Problem
Mohamed*, a 75-year-old real estate investor based in Ontario, owns two real estate holding companies along with various personal assets. Upon his passing, his estate was projected to face a staggering $12 million tax liability.
Since corporate funds cannot directly pay personal tax liabilities, his estate would need to withdraw the funds personally to pay his final income tax return. If the funds were withdrawn from the corporation, additional taxes would need to be paid.
In effect, the estate would need to liquidate $24 million in assets to cover the $12 million tax liability. This is because withdrawing funds from a corporation in Canada triggers personal income tax.
For every dollar withdrawn, approximately 50% could be lost to tax. This scenario created the risk of drastically reducing the value of his estate and leaving his three children with little inheritance.
The Solution
To avoid the forced sale of assets and high taxes, we implemented a life insurance strategy tailored to Mohamed’s needs.
Mohamed purchased $12 million in life insurance, with annual premiums of $1.5 million. Each year, Mohamed pays the $1.5 million premium into the life insurance policy the policy would grow in both cash and death benefit.
Then Mohamed is able to use the life insurance as collateral to secure a loan from a bank. The bank lends him the $1.5 million, which he then reinvests into his portfolio.
This approach maintains his investment portfolio while funding the insurance policy that will cover the tax bill upon his death. In essence, he is able to grow two streams of wealth instead of one. His life insurance will be there to cover future taxes while his portfolio continues to grow as well.
Our team at SWPP coordinates annually with the bank to ensure the insurance values and Sally’s assets are sufficient to support the loan structure. This ongoing management ensures the plan remains viable and effective.
Why It Works
This strategy works because it addresses both the liquidity and tax issues without depleting Mohamed’s assets. The life insurance proceeds are paid out tax-free and fall outside of probate, making them invisible to creditors and the public.
Additionally, the insurance’s growing value helps offset increasing property values and interest costs over time.
At SWPP, our deep knowledge of insurance structuring and estate planning has ensured that Mohamed has the right type of policy, used in the correct way. This is something he wouldn’t have been able to do on his own. It’s complex, and with substantial assets at stake, it’s important to get this right.
Importantly, the solution has preserved Mohamed’s estate’s value and prevented unnecessary asset liquidation.
The Outcome
Mohamed was amazed by the results.
What could have cost his estate $12 million ended up being covered at virtually no net cost.
His children are now set to inherit the full value of the estate without being burdened by tax obligations. Mohamed feels secure knowing his family won’t lose what he spent a lifetime building.
After his father died, many years ago, Mohamed experienced a large tax loss when inheriting assets. He wanted to make sure that didn’t happen to his kids.
This approach not only protects his legacy but ensures privacy and efficiency by avoiding probate, giving Mohamed and his family a lot more peace of mind.
*Names have been changed to protect the identity of SWPP’s clients.
Discover How to Minimize Taxes and Secure Your Legacy
Did you know that without a solid estate plan, taxes and fees in Ontario could claim a significant portion of your wealth?
If you’ve worked hard to build your business, investments, and properties, protecting your legacy for your loved ones is critical. At Strategic Wealth Protection Partners, we specialize in helping high-net-worth individuals in Ontario secure their financial futures.
Our Living Estate Plan is designed to:
- Reduce estate taxes and probate fees.
- Simplify wealth transfer to your loved ones.
- Reflect your values and priorities in every detail.
Your Legacy Matters
With our personalized guidance, we’ll help you navigate options like Living Trusts to protect your assets and ensure your family’s peace of mind. Contact us today to book your Living Estate Plan Consultation and take the first step toward a secure future.
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Planning your legacy is about more than numbers—it’s about ensuring your family remembers you and your values are honoured for many years to come.
Estate planning and trusts can feel overwhelming, especially if it’s your first time. That’s why we’re here.
With our simple, 5-Step Living Estate Plan, we make the process easy, helping you create a comprehensive estate plan or trust that protects your assets from taxes and probate fees while preserving your legacy. Tools like The Final Word Journal capture your story, wishes, and essential details like accounts and end-of-life plans, ensuring your family has clarity and comfort.
Take the first step today—schedule a consultation call and give your family the ultimate gift: peace of mind and the assurance they were always your priority.
Read More
If you’re starting your estate planning process, you may find these articles helpful:
- How to Avoid Capital Gains on a Cottage in Ontario
- How to Avoid Estate Tax in Canada in 2025
- Guide to Holding Property in a Trust in Ontario
About the Author
RON COOKE, PRESIDENT & FOUNDER OF STRATEGIC WEALTH PROTECTION PARTNERS
With over 30 years in financial services, I’ve seen the challenges families face when a loved one passes—lost assets, unnecessary taxes, and emotional stress. That’s why I created the Living Estate Plan, a comprehensive process to protect assets, eliminate estate and probate fees, and create legacies that are remembered for many years to come.
This plan ensures your family receives not just your wealth, but a meaningful reminder of your care and love. Tools like The Final Word Journal capture your story, wishes, and essential details, offering clarity and comfort during difficult times.
Your final gift should be more than money—it should be peace of mind, cherished memories, and an organized estate.
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