IG Wealth Management Life Insurance Study: Most Affluent Canadians Unclear About the Important Role Life Insurance Can Play in Estate Planning

• Almost 90 per cent of high-net-worth Canadians plan to pass their estate to the next generation.
• However, just over half have a life insurance policy.
• Less than one-fifth are very knowledgeable when it comes to the tax advantages and benefits of life insurance on their estate.

WINNIPEG, MB, Sept. 27, 2023 /CNW/ - According to IG Wealth Management's (IG) life insurance study, the majority (88 per cent) of high-net-worth (HNW) Canadians (defined as individuals with at least $1 million in investible assets) plan to pass their estate onto the next generation. However, many are unaware of the important role life insurance plays to help safeguard the value of their estate and mitigate the tax implications of a wealth transfer.

The study, conducted in partnership with Pollara Strategic Insights, found that:

• Just over half (54 per cent) of HNW Canadians have a life insurance policy.
• However, less than one-fifth (17 per cent) are very knowledgeable when it comes to the tax advantages and benefits of life insurance on their estate.
• More generally, only one-third (33 per cent) have a good understanding of the tax implications of passing on their estate to their beneficiaries.

A life insurance policy can help offset the associated costs of a wealth transfer, including probate fees and taxation, to ensure that the next generation receives the inheritance amount as intended.

"It's not surprising to learn how many affluent Canadians plan to pass their estate onto the next generation," said Alana Riley, Head of Insurance, Mortgage and Banking at IG Wealth Management. "What's concerning is the knowledge gap – most lack understanding about the role life insurance plays in preserving the value of their estate and protecting their legacy. This presents an important opportunity for education among financial advisors and their clients."

Ms. Riley noted that assets being passed down from one generation to the other can face a significant tax burden and could result in the beneficiaries being unable to afford to keep them. "Take, for example, a family cottage passed down to the next generation. The inheritors could face significant tax implications and may not be able to afford to keep the cottage. However, a life insurance policy – which isn't taxable - can help cover these tax expenses and ensure the cottage stays within the family."

The majority (78 per cent) of HNW Canadians work with a financial advisor, but few have discussions with their advisor about the role life insurance can play within the context of their financial and estate plan.

The study found:

• Only two-fifths (42 per cent) say their financial advisor provides them with strategies to minimize tax burdens using life insurance.
• Just one-third (36 per cent) say their financial advisor discusses life insurance in the context of their financial and estate plan.

"It's reassuring to see how many high-net-worth Canadians seek advice from their financial advisor," said Riley. "However, as part of these conversations, advisors have an opportunity to remind clients that, in the name of wealth preservation and maximizing your estate for the next generation, life insurance can play a critical role."

This study was conducted with an online sample of 500 high-net-worth adult Canadians, who have at least $1,000,000 in investible assets and are at least the shared decision makers of these investments. This research was conducted from August 8th to 15th, 2023. Results from a random sample of this size can be considered accurate to within ±4.4%. 19 times out of 20.

Founded in 1926, IG Wealth Management is a national leader in delivering personalized financial solutions to Canadians through a network of advisors located across Canada. IG Wealth Management has $117.8 billion in assets under advisement as of August 31, 2023, and is a member of the IGM Financial Inc. (TSX: IGM) group of companies. IGM Financial, together with its subsidiaries, is one of Canada's leading diversified wealth and asset management companies with approximately $262 billion in total assets under management and advisement as of August 31, 2023.

SOURCE IG Wealth Management

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