Corporate-Owned Life Insurance for BC Business Owners

Manage the tax drag on retained earnings sitting in your BC corporation and build a policy asset that supports your succession plan.

British Columbia's combined federal-provincial top personal marginal rate is 53.50%, and passive investment income earned inside a BC corporation is taxed at rates that vary by income type and can also grind down your federal small business deduction. For incorporated BC business owners carrying meaningful retained earnings beyond working capital needs, corporate-owned life insurance (COLI) is one tool worth evaluating alongside other retained-earnings strategies.

GOALD is licensed in British Columbia and meets clients by appointment at partner and PPI boardrooms or by video — we are not a staffed retail branch or office.

Why Corporate-Owned Life Insurance Matters for BC Business Owners

Passive Income and the AAII Grind

Interest, rent, foreign income, taxable dividends, and capital gains earned inside your corporation are taxed differently, and some of the tax is refundable to the corporation through RDTOH as dividends are paid out. Separately, once your corporation's adjusted aggregate investment income (AAII) exceeds $50,000, your federal small business deduction begins to grind down, fully eliminated at $150,000 of AAII. Growth inside a qualifying exempt life insurance policy is generally not included in this passive income calculation.

The Capital Dividend Account (CDA)

A death benefit paid to your corporation generally credits the CDA in an amount equal to the proceeds less the policy's adjusted cost basis. A capital dividend paid out of the CDA can flow to shareholders without personal income tax, but only if the corporation makes a valid election and the shareholder's residency and other facts support that treatment.

BC Probate Fees

British Columbia charges probate fees (officially estate administration fees) of roughly 1.4% on estate assets over $50,000, payable when a grant of probate is applied for. Insurance proceeds paid directly to a named beneficiary or, in the corporate context, to the corporation rather than to your personal estate, are generally not part of the probate calculation.

BC Tax Landscape for Business Owners

British Columbia's general corporate tax rate is competitive relative to some provinces, but the tax treatment of passive investment income inside a BC corporation depends on the type of income earned and is partly refundable through the RDTOH mechanism. BC's top personal marginal rate of 53.50% makes personal extraction of surplus capital expensive, which is why many business owners weigh corporate-owned life insurance against other uses of retained earnings, such as an individual pension plan, additional active investment, or a buy-sell funding structure.

  • BC Top Personal Rate: 53.50%
  • BC Corporate Rate (Active, General): 12% provincial + 15% federal
  • AAII Grind Range: $50K–$150K
  • BC Probate Fees: ~1.4% over $50K

How GOALD Evaluates Corporate-Owned Life Insurance for BC Clients

  • Corporate Financial Review — We review your retained earnings, cash flow needs, and corporate structure alongside your accountant to assess whether corporate-owned life insurance fits your plan.
  • Policy Design — We obtain a current carrier illustration and design an exempt life insurance policy sized to your corporation's surplus and objectives.
  • Tax Coordination — We coordinate with your accountant on AAII, RDTOH, and CDA mechanics so the policy integrates with your overall corporate tax position.
  • Ongoing Review — We review the policy periodically against your corporation's changing financial position and any legislative changes.

Related planning questions in British Columbia

Frequently asked questions

How does corporate-owned life insurance work in British Columbia?

Your BC corporation applies for and pays premiums on a permanent life insurance policy, generally from retained earnings. Growth inside a qualifying exempt policy generally accumulates without annual accrual taxation. On death, the death benefit is paid to the corporation, and the CDA is credited with the proceeds less the policy's adjusted cost basis. A capital dividend can then potentially be paid to shareholders tax-free if the corporation makes a valid election.

How is passive investment income taxed inside a BC corporation?

It depends on the type of income. Interest and rental income, taxable capital gains, and foreign income are treated differently, and a portion of the tax paid by the corporation is refundable through RDTOH as taxable dividends are paid to shareholders. Separately, once a corporation's adjusted aggregate investment income passes $50,000 in a year, the federal small business deduction begins to shrink, disappearing entirely at $150,000 of AAII.

Can corporate-owned life insurance help with BC probate fees?

British Columbia charges probate fees of roughly 1.4% on estate value over $50,000 when a grant of probate is applied for. When a policy is owned by your corporation and proceeds are paid to the corporation, those proceeds are generally not part of your personal estate for probate purposes — but this does not eliminate probate on your other personal assets or on your shares if held personally.

Who should I talk to about corporate-owned life insurance in BC?

GOALD & Co works with BC business owners to evaluate corporate-owned life insurance alongside other corporate surplus strategies, always in coordination with your existing accountant and lawyer.

Sources and tax notes

This page is general information only and is not tax or legal advice. Tax rates, thresholds, and rules described here depend on your specific facts and the applicable tax year, and are subject to change. Please coordinate with your own accountant and lawyer before implementing any strategy. Life insurance policy values shown or discussed are illustrated and are not guaranteed unless expressly stated as guaranteed in the insurance contract.

Last reviewed: August 2026