8 Advantages Of Online Driving Schools Advantages And Disadvantages Of Government Alto Music Best Guitar Shop Atlanta Motor Speedway Driving Schools Cooking Class The Perfect Gift For Any Austin Driving Intoxication Course Why Not All Driving Feel The Mirth Of Natural Getting Cheap Auto Insurance In South Government Grants And Scholarships For Students Government Purchasing Laws Homes In Hudson Valley At An Ideal How Government Jobs Could How The Government Can Assist How We Find Best And Top Schools How We Find Best And Top Schools Hudson Jeans For A Perfect Hudson Jeans Probably The Best Hudson Rodriguez Dating Hudson Valley Wine Trail And Neighboring Importance Of Air Purifiers Importance Of Government Jobs Its A Miracle a Plane Jennifer Hudson Family Funeral Update Kate Hudson Changes Views And Is Now Considering La Jolla Schools Unique Libraries Vanishing In Michigan Schools Limestone Mining Within Communities Of South Michael Kors Hudson Downtown Models On The Government Motorcycle Sturgis Bike Rally In South Online Government Auctions Payroll South Dakota Unique Places To Meet Singles In South Quality Among Driving Schools Richard Hudson Takes The Helm At Dynamic Sioux Falls Chiropractors Leading Health Professionals South Dakota Pheasant Hunting Taliban Infiltrates South Dakota Legislature The Benefits Of Graduating The Most Common Types Tips To Government Bidding Try Out Hudson Jeans And Get Used Weight Loss Surgery In South
4 Key Qualities of the Best A Proud Member Of The Key Stone A Tough Time for The Coalition Asset Protection How to Get it Right Automobile Accident Litigation Overturning the Unfavorable Can Randy Couture Defeat Mirko Canadas Beautiful Fraser Valley A Buyers Coalition For Deadbeat Dads Coalition Success in Any Language Coalition of Religious Communities Dealing With Interrogation Good Democratic Policing Management and Organizational Issues Essential Facts About Modern Street Fear and Greed Film Tax Credit Financing in Canada Good Cop Bad Cop Good Cop Bad Cop Interrogation Governance and Structure of Home Higher Education and Society Higher Stakes How Street Furniture Is Built to Last How to Ride Your Bicycle Safely Importance of Warning Street Signs Iraq Coalition Keep Cop Removal Marketing and Privacy Law What You Need Mirko Cro Cop Filipovic Who Can Stop Mommy Coalitions A Mothers Playing Cops and Robbers How to Host Police Brutality Police Costumes That Can Stop Traffic Police Written Exam How To Think Politics of Coalition and Contradictions Privacy Issues in Real Estate Rebranding The Nigerian Police Sexy Cop Costumes Stylish Shrinking Coalition Street Fight Quick Technique Street Fight Surprise Street Fighting One Way To Make The Coalition For Better Student The Components of the Perfect The Municipal Budgets II Roleplayers Documentation Tips for Finding States Travel Warnings and Coalitions Used Police Cars What Are the Qualities What is Neighbourhood Policing What to Do When Your Employer Who in the Police State Gets
Asset Protection - How to Get it Right
It is as true today as it was 2500 years ago when Lao Tzu said: "When the student is ready, the teacher will appear." For the last five years I have been teaching risk management solutions at the university level. During this time I have learned that to be a good teacher one must also be a persistent researcher in the search of better solutions for clients' most common needs.
The aim of this month's article is to share the lesson I learned from a recent lunch I had with Andrew Rogerson, one of my teachers, a lawyer at RogersonLaw.com who has developed a specialty niche in Toronto that focuses on Estate Planning and Asset Protection both Onshore and Offshore. Our conversation was primarily focused on legal solutions a client may employ to avoid asset protection strategies being set aside by the courts.
At the beginning of our lunch Andrew made the point that all credit protection strategies should be made at a time when the client is clearly not insolvent or on the eve of bankruptcy. Andrew clarified this by stating: "Planning must be justifiable in terms of non asset-protection objectives."
He illustrated this concept by recounting the merits of the case of Ramgotra (1996) where the Supreme Court of Canada held that the settlement of funds transferred from non exempt RRSP's into a RRIF managed by an insurance company should maintain its exemption status from creditors' hands. The Court's rationale was that the transaction was part of a legitimate retirement planning exercise. This was so, even though the end result was the transfer of funds out of the reach of Dr Ramgotra's creditors. The exact process by which Dr Ramgotra managed to keep his RRIF proceeds was as follows. He transferred non-insurance managed RRSP's into an insurance administered RRIF in 1990. This was done in good faith at the suggestion of his Certified Financial Planner. The disposition took place within 5 years of bankruptcy.
The court held, however, that although the assets vested in the trustee in bankruptcy, the trustee could not deal with them and had to return them to the bankrupt (Dr Ramgotra) upon the bankrupt's discharge. This was because the Bankruptcy & Insolvency Act ("BIA") precludes the trustee from dealing with assets that are exempt from execution or seizure. The court held that there was no evidence of fraudulent intent. The transfer was done in good faith as part of normal prudent retirement planning.
The Insurance Advantage
As it stands as a general rule of thumb, all assets of an individual or entity are security for unpaid debts owing to a creditor. This applies whether or not the individual or entity is bankrupt. Traditionally, life insurance products have been given special protection against the claims of creditors under provincial legislation. The legislation, which is fairly consistent across Canada, is intended to protect the rights of the beneficiaries under the contracts. Thus products offered for sale by a life insurance company are generally creditor protected.
The definition of insurance products in all provinces includes annuity contracts. Most RRSPs and non-registered investments issued by insurance companies take the form of an undertaking to provide an annuity and as such fall under the definition of life insurance under provincial legislation. Many provinces do not provide creditor protection for non-insurance RRSPs and no province provides creditor protection for non-registered monies held in non-insurance investment vehicles.
Creditor protection during the lifetime of the owner can be achieved in two ways; by making an irrevocable beneficiary designation in a life insurance contract or by designating as beneficiaries certain family members specified in provincial insurance legislation.
After the death of the life insured, where an appropriate beneficiary has been designated, the creditors of the deceased are prevented from seizing the policy. The death benefit of the policy is specifically excluded from the estate of the owner. This is because the proceeds flow directly to the beneficiary and are exempt from the claims of creditors.
It should be noted that creditor protection only exists where the policy is owned by an individual. Policies owned by a corporation offer no direct creditor protection however a properly implemented corporate structure can achieve creditor protection. Where creditor protection is important, it is advisable to name alternative or contingent beneficiaries within the protected class, since the exemption from seizure can be lost if the designated beneficiary dies.
Insurance products fall into two categories; life insurance policies, and deferred annuity contracts. When hearing of " a life insurance contract" most people think of a traditional life insurance policy where one pays a regular stream of premium payments and a death benefit is paid to a designated beneficiary upon the insured's death. However, accumulation and investment products sold by life insurance companies are "deferred annuity contracts" and as such also qualify as life insurance policies.
Cash can be accumulated within a traditional life insurance policy subject to certain maximums imposed by the Income Tax Act. Within these maximums the investment growth is not subject to accrual taxation. This is commonly referred to as an "exempt policy". Furthermore, in most circumstances, the policy fund or cash value is paid out to the designated beneficiary as a tax free benefit in addition to the face amount of the policy. This feature makes accumulating and investing funds within an exempt policy by an individual an attractive tax deferral and estate planning tool, particularly when combined with the added value of creditor protection.
All rights reserved
Copyright © 2013 Safe Streets Coalition