Insured Annuities

The insured annuity will give a significant increase in after-tax income compared to traditional interest bearing investments such as GICs or Government of Canada Bonds.

Taxable income is lowered significantly as most of the annuity income is a tax-free return of principal. The annuity can be established on a prescribed taxation basis which spreads out the income portion of the annuity over the lifetime of the annuitant. The T4A that the annuitant receives each year will be the same for their lifetime.

As mentioned above, the majority of the payment received from a non-registered Prescribed Annuity is a tax free return of principal. This will lower your annual taxable income each year and if you are experiencing clawback on your OAS payments, this can reduce (or possibly eliminate) this clawback.

With an insured annuity, you don’t have to worry anymore about how long to lock your money in with a GIC or a bond. Or better yet, no more rolling over those 1-year GICs each year waiting for the interest rate to go up.

Annuity income is guaranteed 100% up to $2,000 per month of income. This is insured by Assuris which is the equivalent to the bank’s CDIC coverage. You can find out more about this at their website: Assuris. Assuris

No matter how long the annuitant(s) live, the income will pay them for their lifetime regardless of how long that is. If desired, the annuity can be structured to have a minimum guarantee payment period in order to recoup some or all of the principal regardless of when the annuitant(s) die.

Financial products with insurance companies may be protected from creditors, provided that the investment is made before any creditor issues are apparent and the decision is a sound investment decision, then the creditor protection applies. As long as you were solvent at the time of establishing the plan, the funds are protected from creditors.

At death, as long as there is a named beneficiary on the plan, these funds will pass directly to the named beneficiary without forming any part of the estate. This will then bypass all probate, legal, trustee, and any other administration costs associated with winding up an estate.

When there is a named beneficiary on an insurance policy, payments are paid directly to them without having to wait for the estate to be settled. This gives the beneficiary(s) the funds immediately so that they can use them as they see fit. These funds will be paid usually within 10 business days of the proper claim forms being submitted. With traditional bank-held GICs, beneficiary(s) of an estate normally have to wait for the will to be probated and the estate to be settled before receiving the funds. This can often take more than a year.

If you’re over 65 and you don’t have any other qualifying income vehicles, annuities qualify for the pension tax credit which means that your first $2,000 of income is tax free.