Most people think of life insurance as a necessary expense. It’s something that you almost begrudgingly pay for, in the hope that you’ll never need it, but with the expectation that it will protect your family’s finances, should the worst happen.

What most people don’t realize, however, is that life insurance can be used as an extremely useful estate-planning tool that can go far beyond keeping your family financially secure. It can help maximize your estate’s value and ensure that your will is distributed fairly, all while funding your estate’s tax liabilities.

Let’s examine the ways that life insurance can provide tax benefits, particularly for those investors with larger estates. 

Using life insurance to preserve your estate’s value

There are numerous assets that could be extremely valuable and which could trigger a significant tax bill when you leave them in your will. These could include, for example, RRSPs, vacation or rental properties and a business.

Without an estate preservation strategy, the beneficiaries of your estate might have to sell off a considerable amount of your investment assets or even the family vacation home to cover your final tax bill.

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