Lump sum payout advice

[basilbear76]

Hello just got let go. My package is for about 170 000. I'm searching out an accountant now for advice but also thought I would post here. My former company is only allowing me to take a lump sum. I was just wondering if there are any wise measures to take here to fork over the least amount to taxes. Thanks

 

[resjudicata]

@basilbear76 def. very good to see an employment lawyer about any termination package, good to see accountant about the tax part, i think the rrsp lump sum thing sometimes is important, the deadline is the first 90 days of 24 for the '23 tax year, i think.

 

[bicyclerepairman]

@resjudicata The deadline is February 29th.

 

[sjljmt]

@basilbear76 Does this relate to termination of employment?

 

[basilbear76]

@sjljmt Yes, I was just fired. Is that what you mean?

 

[sjljmt]

@basilbear76 Have you accepted your package yet? If not you might want to look at this https://taxpage.com/articles-and-tips/how-severance-pay-is-taxed-in-canada-guidance-from-a-canadian-tax-lawyer/#:~:text=Employment%20that%20pays%20severance%20pay,on%20the%20amount%20of%20payment.

 

[maria90]

@basilbear76 Put it straight into a permanent whole life insurance policy. You will average gains of 12%/yr and not have to pay taxes on it. And also you can borrow up to 80% of it back from yourself with no set repayment date or rate and the loan is also non taxable and your full amount keeps growing and if you don’t pay it back it just comes out of your payout at death. That’s how the rich get richer and pay no taxes. Become your own bank.

 

[aussiewife]

@maria90 This is not correct. Borrowing against the cash surrender value of a whole or universal life policy absolutely has an interest rate attached to it. But, you don't have to pay it, and as long as you keep paying your annual premiums, the policy will remain in place, but that loan will continue to compound and when it comes time for your family to make the claim, they will get less.

I have a policy start for me as a baby (thanks granddad), and I borrowed $1000 in the late '80s and then $2000 in the early '00s. The balance owing is almost $11000 or so. I believe it was 8%, as of the last statemnet. It's now about a third of the current policy, and thanks to compounding, it is growing faster every year.

I still think it's not a bad option to access funds, but definitely discuss it with an accountant and financial planner first (that are not planning to profit from the juicy sale of the policy and loan).

I would refer to the various insures for more details:
https://www.canadalife.com/insuranc...-life-insurance/universal-life-insurance.html

Or

https://www.cpp.ca/blog/universal-vs-whole-life-insurance/

 

[alysson]

@basilbear76 Severance, retirement benefit going into a LIRA, a combination of both... ?