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Your corporate clients may not know Sun Life Guaranteed Investment Funds (GIFs) contracts owned at the corporate level offer several attractive benefits for business owners. GIFs are also known as segregated fund contracts.
Consider GIFs when selecting the appropriate portfolio investment vehicle as you work with corporate clients. A GIF is a life insurance contract that contains investments similar to those mutual funds offer. But, unlike mutual funds, GIFs offer guarantees. These guarantees can protect the value of a corporation’s investments at maturity or death.
Sun GIF Solutions is part of Sun Life Global Investments’ product suite that combines the growth potential of investment funds with the benefits of an insurance contract. Sun GIF Solutions is one product, but for many needs, combining three different series in one flexible contract. Corporations also have the flexibility to access money at any time.2
With Sun GIF Solutions, corporations can:
Sun GIF Solutions offers three solutions to meet a corporation’s evolving needs:
Grow savings – while enjoying the benefits of protection the GIF contract can provide.
Protection – and the efficiency of payments to your business may be critical in succession planning.
Guaranteed lifetime income – with the flexibility to address all corporate planning needs.
The corporation has the flexibility to move from one series to another, as the corporation’s needs evolve. In certain instances, business owners can make the series switch without incurring a taxable disposition.4
They can also create a guaranteed, market-based pension plan inside the corporation, with another GIF contract, Sun Lifetime Advantage GIF. This contract offers the ability to defer guaranteed income for life until desired.
Whether the funds are for retirement planning or for bridging potential downturns in the business, it’s critical that business owners are able to invest as they want, while ensuring that the bulk of the business’ funds are available as needed. Sun GIF Solutions – Estate Series offers a maturity guarantee of 75% of all deposits and a death benefit guarantee of 100% of all deposits (guarantees are reduced proportionately for withdrawals). The death benefit guarantee is eligible for an automatic reset each year until age 80 of the annuitant; if the market value of the contract is higher than the current guarantee amount, the death benefit guarantee will automatically increase to equal the market value.
Want to know more about the taxation of a non-registered income? Read this article:
After a fund level income allocation item (e.g. dividend, interest, etc.) becomes taxable, it is treated as part of the corporate investor/unitholder’s after-tax money invested effectively in the segregated fund. When corporate investors/unitholders withdraw funds from their segregated fund (systematic or one time) a potential capital gain or loss will be reported from the disposition of the segregated fund units, which are the proceeds of disposition less adjusted cost base (ACB). For tax purposes, a withdrawal is treated as coming proportionately from the ACB and unrealized gains, if any.
When withdrawals by the corporation from the segregated fund are subsequently flowed out to the shareholders in the form of a corporate dividend, they will be included in the income of the shareholders.
Unlike mutual funds, segregated funds can flow net capital losses through to the investor/owner of the segregated fund. That is, capital losses over and above those used to offset capital gains inside the fund may be used directly by the owner of the contract. The owner can apply these losses against other capital gains in the same year, or carry back such losses up to three years, or forward indefinitely. This unique feature creates additional tax planning opportunities. This segregated fund advantage ties in with the notion of investing in a greater proportion of equity-based funds due to consumer confidence in the underlying guarantees.
With Sun Life GIFs, the insurance company keeps track of each unit holder’s ACB. When units are redeemed, Sun Life Financial will calculate the realized gain or loss and report this on the investor’s T3 form. As such, there is no need to spend time tracking ACB or contract an accountant to do so.
Although Sun Life GIFs is an insurance contract, it won’t create a material credit to a corporation’s CDA when the annuitant/insured person dies, as it is potentially the case with a corporately owned life insurance policy. However, the contract structure ensures that proceeds flow to the desired beneficiary at the appropriate time.
For a corporately owned Sun Life GIFs contract, should the beneficiary be an individual, the death benefit would create an unintended, fully taxable benefit at that time. As such, the appropriate corporate entity needs to be chosen as the beneficiary.
You can trust Sun Life Global Investments to help corporate clients grow their wealth and enhance their tax efficiency.
Founded in 1865, Sun Life has helped Canadians manage and grow their assets for over 150 years. The following reasons can give you confidence that your money is safe with Sun Life, and that we have the expertise and solutions to focus on meeting your needs:
Strong commitment to service excellence
1 Results from Ipsos polls conducted in February 2021 and March 2022.
2 Note that withdrawals will affect guarantees.
3 Some restrictions apply.
4 Moving from one series to another series will affect lifetime guaranteed income.
5 As at Dec. 31, 2022.
