If you own a Canadian corporation, there is a structure that can move roughly this much of your estate to your family completely tax free at death. It uses corporate life insurance, a bank loan, and Foundation Capital. Here is exactly how it works.
PV, Mit & Jeff
Corporate life insurance, a bank loan against the policy, and 100 percent of the borrowed money working inside FCPRET and Foundation Development Funds. This is what an Immediate Financing Arrangement actually looks like, walked through in dollars.
One question we get from business owners over and over: "I like Foundation Capital, but my company already needs the cash flow. If I invest a big cheque, my operating money is stuck. Is there a way to do both?"
Yes. It is called an Immediate Financing Arrangement (IFA). It is not new, it is not exotic, and it is not tax fiction. It is a well established Canadian corporate structure used quietly by business owners, professionals, and family offices for decades. It combines three things you probably think about separately: life insurance, bank borrowing, and private investments. And when you stack them, you get an outcome that is genuinely better than any of the three on their own.
Mit put a full 12 page walkthrough together on this last week. Today's letter is the concept in seven minutes, in dollars. If you want the full guide, the card is halfway down. Before that, a quick pre-read: Mit's Sunday universe webinar is still the best on ramp for anyone new here.
FCPRET, all three development funds, and the affordable housing side in one sitting. Context for how the investments inside the IFA structure actually work.
1. Your company buys permanent life insurance on you.
The company is the owner of the policy. The company pays the premiums. The company is the beneficiary of the death benefit. This is the protection layer. If you die tomorrow, seven figures land in your company account, immediately.
2. A lender uses the policy cash value as collateral and lends the company money.
This is the "financing" part of Immediate Financing Arrangement. Once the policy builds cash value, a bank will advance a loan against it. The loan is separate from the policy. Interest is real (illustrated at 5 percent), and it has to be paid. But the company just took its own premium money back out, ready to be redeployed.
3. The borrowed money goes into Foundation Capital.
The illustration Mit built for a business owner named Raj puts 60 percent into FCPRET (targeted 15 percent annualized) and 40 percent into Foundation Development Funds (targeted 20 percent). Cash distributions from FCPRET are reinvested through the DRIP. The investments compound while the loan compounds. The whole game is that the investment return has to outrun the loan interest by enough to justify the risk. Over the four year Fund III horizon and the compounding FCPRET yield, it does.
4. When you die, the lender is paid first. The rest goes to your family tax free.
This is where the magic happens. The death benefit lands in the company. The company pays off the loan. Whatever is left over becomes a Capital Dividend Account (CDA) credit inside the corporation, which is a tax record that lets the company distribute that value to your family as a tax free dividend. The CDA is not extra cash. It is the tax free channel that lets the estate move real cash from the company to the family without a tax hit on the way out.
Advantage 1. You never have to choose between protection and investment.
Business owners typically pick one. Either premium dollars go into the insurance company and stop working, or investment dollars go into a fund and there is no protection layer if something happens. The IFA has you doing both at the same time with the same dollar.
Advantage 2. Corporate money stays working.
The premium goes in, the loan advance comes out, and the loan advance goes into Foundation Capital. Net effect: the same dollar is in the company (as loan proceeds) and inside FCPRET (compounding). This is why business owners use IFAs. Cash is not idle inside a permanent policy.
Advantage 3. The CDA route is uniquely powerful for Canadian corporations.
This is the piece most business owners genuinely underestimate. When corporate life insurance pays out, the difference between the death benefit and the policy's adjusted cost basis flows into the CDA. That CDA credit can then be paid to your family as a tax free capital dividend. In Raj's year 5 stress test, that is $2.75 million to his family, with zero income tax at the personal level. No RRSP structure, no TFSA, no trust arrangement matches this on the same dollar amount, at the same speed, at death.
Advantage 4. Foundation Capital's return profile compounds the whole structure.
The 5 percent loan interest is the cost. FCPRET's 15 percent targeted annualized return and Dev Fund III's 20 percent compounded target are the offset. That spread is the entire economic case for using an IFA versus keeping the premium invested passively. Weak investments defeat the plan. Strong investments compound it. This is why the guide is explicit that a weak investment choice is the biggest risk to the whole structure. If the investment is not right, do not borrow.
Written by Mithulan Perinpanayagam, CPA CA · August 2026 · 12 pages
Every number in this letter comes from this guide. Full Raj illustration, year by year projections, downside walkthrough, and the checklist for whether an IFA fits your situation. Send it to your accountant.
Honest scope. An IFA is not universally right. It fits a business owner whose company can carry the annual policy premium and the loan interest through a bad year. It fits someone who genuinely needs permanent life insurance in the first place. And it fits an investor who is comfortable with the illiquidity and risk profile of private real estate investments as the growth engine.
If your company is fragile in a downturn, do not borrow. If you do not need permanent insurance for family and business risk, the whole structure is unnecessary. If you cannot commit for 10 plus years, the interest math does not work. Doing nothing is a valid decision.
Foundation Capital does not sell or arrange life insurance. We do not receive any insurance referral compensation. The insurance, lending, tax, and legal pieces of the plan require a licensed team of your own. What we do is provide the investment engine (FCPRET and the Foundation Development Funds) that sits at the growth end of the structure, and we provide the education to help you evaluate whether the whole thing fits your situation.
If you are already in the middle of estate or corporate insurance planning with your team, take the guide to your next meeting. If this is the first time you have heard the acronym IFA, book a call with us and we will walk through the investment side of the structure. From there we can point you to the licensed insurance advisors we know who actually build these plans.
600 Units · Wellington BRT Corridor · Workforce Rent
Targeted: 20% compounded annually (4 year hold)
The 40% growth engine inside Raj's IFA. $100K minimum · Accredited investors, existing FC investors, or FF&BA exemption.
$10K Minimum · RRSP / TFSA / RESP / LIRA Eligible · Also Cash
Targeted: 15% Annualized (7% cash monthly + 8% appreciation)
The 60% income engine inside Raj's IFA. Cash distribution DRIPs directly into more units, compounding the plan.
Talk soon,
PV, Mit & Jeff
P.S. If you own a Canadian corporation and have never had this conversation with your accountant, use the guide as the excuse to bring it up. Even if the answer for you is no, understanding why an IFA does or does not fit your situation is worth an hour of your accountant's time.
