Taxes support vital infrastructure, such as roads and hospitals, but income tax rates that climb over 50 per cent leave many farmers feeling that the value just isn’t there. There are strategies — all within the tax code — that can help to keep income tax at a more manageable level.
In this episode of Continuity Conversations, host Shaun Haney speaks with Derryn Shrosbree, CEO of 33seven, to explore how farmers can use whole life insurance policies to legally and strategically reduce their personal income tax burdens. They also touch on broader issues of succession planning and estate equalization.
Shrosbree explains that it's possible to use corporate retained earnings from the farm to pay a premium for a whole life insurance policy. This policy becomes an asset of the farm. In the second step, the farmer can use this policy as collateral to borrow back the premium amount from a bank. The loan, taken personally, is not considered taxable income, thereby avoiding personal income tax while maintaining access to needed funds for living expenses or reinvestment.
This strategy is not only about tax avoidance, it’s also a critical tool for estate equalization, he says. By using life insurance policies, farmers can ensure that off-farm heirs receive cash while on-farm heirs keep the land, reducing potential family conflict after a farmer’s death.
The conversation also touches on why only whole life insurance policies — rather than Universal Life or term insurance — are suitable for this strategy. He says that banks will only lend against whole life policies because of their simplicity, stability, and long-standing track record.
Importantly, he says that this approach is entirely legal, widely used, and supported by well-established institutions. He notes it’s a straightforward, low-risk method that has been around for over a century and has not triggered audits or legal concerns for his clients in 17 years of practice.
Shrosbree adds that there's a particular mindset required for successful succession planning and cautions against treating a parent’s death as a career plan for the next generation. Instead, work towards open conversations about stewardship and shared goals to ensure smooth transitions and family harmony.
