Taxes during disability.
As a business owner, owning a disability insurance policy through your corporation might sound like a great idea. Here's why maybe NOT...
Emily was the proud owner of a successful digital marketing agency, 'Maple Marketing Solutions,' which she had built from the ground up.
With her unwavering commitment and innovative strategies, Emily had turned her small startup into a thriving business with a dedicated team of talented professionals.
Emily understood the importance of safeguarding her financial future.
She decided to explore disability insurance to protect herself and her business in case of unforeseen circumstances. After consultation with her financial advisor, she opted for a disability insurance policy THROUGH HER CORPORATION.
Little did Emily know, however, that there was a crucial aspect she hadn't considered – the tax implications when transferring the insurance benefits into her hands.
Fast forward a few years, and Emily faced an unexpected health challenge that left her unable to work for an extended period.
She filed a claim to access the benefits that would help cover her living expenses and maintain the financial stability of her company.
Emily didn't know the insurance benefits were taxable when received by the corporation and then transferred to her personally.
This unexpected tax liability took a significant chunk out of the intended financial support, leaving Emily grappling with unexpected financial strain during an already challenging time.
Her advisor maybe should have recommended a personally owned disability policy, but if costs and after-tax costs are a concern, there are many ways to structure the policy for a lower premium in early years and increase the benefit amount as her business grows.
MCO Private Wealth has experienced advisors who can help you choose and structure your disability policy—the right way!
