1. 4827 POINTS
    J Paul Wilson CFP, CHFCPRO
    Certified Financial Planner, JPW Insurance Retirement Investments, Halifax, Nova Scotia, Canada
    An Endowment Plan, is a life insurance policy that is designed so that the guaranteed cash value equals the face amount of the policy at a specified age or time. A whole life policy is for example an Endowment at age 100, since that is when the guaranteed cash value equals the face amount.

    20 year Endowments and Endowments at ages 65 and 70 used to be quite popular savings vehicles. In Canada, the government legislated the maximum cash value to death benefit ratio permitted needed to keep the policy exempt from accrual taxation to that of Endowment at age 85. The result being that insurance companies do not issue those Endowments anymore.

    If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.

    If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
    Answered on June 17, 2014
  2. 7479 POINTS
    Steve KobrinPRO
    President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
    Endowment plans are designed to really push the cash accumulation inside your policy.

    Why would you want to do that?

    I mean after all, the purpose of life insurance is to provide the survivor benefit you need, when it is needed, for the best price available. Each dollar of benefit literally costs pennies. It is a great deal.

    So how does cash fit into this picture?

    It can be superb icing on the cake. Solid whole life products provide great guarantees on the cash accumulation. Solid whole life companies provide some hefty dividends on a non-guaranteed basics.

    Universal life can provide not only attractive cash accumulation, but some pretty interesting distribution options.

    And according to current tax law, all this money can be available with little or no taxation. (Ask your attorney if you don’t believe me).

    BUT certain rules have to be followed if you want to keep Uncle Sam out of the picture.

    An endowment contract could very well trigger a taxable event. When a policy endows, it could exceed the threshold of growth that the government authorities allow before they tax you. A pretty good sign this has occurred is when the cash value equals the death benefit.

    Is this necessarily bad?

    It doesn’t have to be. If you get the proper advice from your broker and your tax advisor, this could be a planned event in which you still benefit. Even considering the tax you will have to pay, you could still be way ahead of the game financially.

    However, if you really want to avoid a taxable event, your insurance company will help you. They really don’t want to be sued by you or anybody else who mistakenly gets a tax bill you don’t want to pay. They will give you illustrations to your hearts delight with all kinds of red flags screaming endowment! endowment! endowment!

    You can then plan accordingly. To endow, or not to endow. That is the question :)
    Answered on August 12, 2015
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