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The Study

When the tax at death is funded in advance, the portfolio stays whole.

A composite case. A BC founder's holding company holds a portfolio you manage. On death the shares are deemed sold and the gain is taxed. Someone pays that tax: either the portfolio, or a structure built for it.

	Without the structure	With the structure
Portfolio in the holding company, under your management	$20,000,000	$20,000,000
Tax on the shares at death1	$5,216,000	$5,216,000
Paid from	Sale of portfolio assets	Insurance benefit, paid out tax‑free2
Portfolio left under management	$14,784,000	$20,000,000
What that difference is worth twenty years on3	$13,840,000 no longer compounding under your mandate	Intact

Funding it gradually

The premium is borrowed each year rather than drawn from the portfolio. The only running cost is interest, which builds gradually and sits within what an operating business already earns.

	Financed, paid from operating income	Sold from the portfolio at death
Premium, illustrative4	$300,000 a year for ten years, borrowed against the policy	None
Interest in year one5	$18,000	None
Interest from year ten onward5	$180,000 a year	None
Total cost over twenty years	$2,790,000 in interest, spread over twenty years	$5,216,000 in one day, plus $13,840,000 of lost compounding
Drawn from the portfolio	Nothing	$5,216,000
At death	The benefit repays the loan and funds the tax	The estate sells a quarter of the portfolio

• The mandate survives the estate whole and passes to the next generation whole.
• The funding is a planned corporate outflow over a set period, not a forced sale at the worst moment.
• Where the premium is financed against the policy, the structure can run close to cash neutral for the company: the portfolio stays invested and the borrowing is retired from the benefit. Whether that fits the balance sheet is tested in a review.
• When the share structure is set up before the policy is issued, the policy's own value is kept out of the estate's taxable amount. That structure is covered in a review.

1. Composite example, British Columbia, 2026 rates. Shares with an adjusted cost base of $500,000 are deemed disposed of at fair market value on death (Income Tax Act s. 70(5)); capital gain $19,500,000, one half included in income (s. 38(a)), taxed at BC's top combined marginal rate of 53.50%, an effective 26.75% on the gain: $5,216,250. Assumes no surviving spouse, or the second death, and post-mortem planning so the amount is not taxed again inside the corporation.
2. The death benefit is received by the corporation. The amount above the policy's adjusted cost basis is credited to the capital dividend account (s. 89(1)(d)) and paid to the estate as a tax-free capital dividend (s. 83(2)). The policy is sized to the liability; premiums are paid from corporate surplus over a defined period, or financed against the policy, and are quoted in a review.
3. $5,216,250 compounded at 5% a year for twenty years, before fees and tax. Illustrative only.
4. Illustrative premium, assumed for this example: $300,000 a year for ten years on a policy sized so the death benefit covers both the tax and the loan balance. The actual premium depends on age, health and the carrier's illustration and is produced in a review.
5. Interest at an assumed 6% a year on the premiums borrowed to date, paid annually from operating income rather than added to the loan; the lender sets the actual rate. Year one: $300,000 at 6%; year ten onward: $3,000,000 at 6%. Whether any interest is deductible depends on how the borrowing is used and is confirmed with the company's accountant.