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Case Study: Protecting the Family of a High-income Earner

Updated: Jan 20, 2019

High-income earner taxed at highest tax rate; new rules regarding splitting income through paying dividends to family members has limited ability of couple to reduce total family taxes.

A couple with two young children, one spouse is a professional and incorporated

The Need

Back-up plan if high-income earner gets sick for a long time or has an early death.

The Story

Dr. J and Mrs. J work hard to provide for their family of four. In the past Dr. J paid Mrs. J a salary and dividends as she had no other income. As of 2018, their accountant advised this can no longer continue unless Mrs. J is actually working in the business. But Mrs. J is taking care of their young son and daughter, driving them to school and activities. Also Mrs. J worries what would happen if Dr. J got sick from the high-stress profession how she would be able to pay for everything.

Dr. J and Mrs. J worked with their financial advisor to make an inventory of their assets, prepared for short-term, medium-term and long-term retirement savings. Also Dr. J used the professional corporation to put in key person life insurance, savings life insurance, critical illness insurance and disability insurance to protect Mrs. J and the lifestyle of the family. They did not sacrifice saving for retirement as resources were able to be stretched to also save for long-term.

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