Don’t Put Off Your Decision to Buy Life Insurance
2016 is an opportune year to buy life insurance. New laws affecting the taxation of life insurance come into effect on January 1, 2017. After this date new policies will not perform as well as they do currently.
The good news is that the proceeds of life insurance policies paid at death still remain tax free. What has been affected is the amount of cash value that may accrue in a policy and the tax-free distribution of death proceeds from a life insurance policy owned in a corporation.
How will this impact your existing and future policies?
Adjustment to the Maximum Tax Actuarial Reserve
Whole Life and Universal Life policies are valuable vehicles in which to accumulate cash value. The limit of how much can be invested is governed by the Maximum Tax Actuarial Reserve (MTAR). If the cash value ever exceeds the MTAR limit, the policy is deemed to be “offside” and will be subject to accrual taxation. Read more
Canadians may need to rethink their risk management
In a recent study conducted by the Life Insurance and Market Research Association (LIMRA), it was reported that 61% of Canadians hold some form of life insurance. Surprisingly, it also revealed that only 38% of Canadians own an individual life insurance contract.
In another study of middle class Canadians, Manulife reported that 79% had no individual disability insurance and 87% had no individual critical illness coverage.
What both of these studies conclude is that most Canadians rely heavily on their group benefits for their family’s insurance protection. Read more
Permanent life insurance, such as Whole Life or Universal Life, has long been accepted as a tax efficient way of accumulating cash for future needs. Soon the amount of funds that can be tax sheltered within a life insurance policy will be reduced by new tax rules which take effect January 1, 2017. These changes may make 2016 the best year to buy cash value life insurance.
The changes to the tax rules regarding life insurance have resulted in an update to the “exempt test” which measures how much cash value can accumulate in a policy before it becomes subject to income tax.
Highlights of the new rules and their effect
For Cash Value Life Insurance: Read more
If you have a mortgage it makes good sense to insure it. Owning a debt free home is an objective of any sound financial plan. In addition, making sure your mortgage is paid off in the event of your death will benefit your family greatly.
The question is should you purchase this coverage through your lending institution or from a life insurance company? A good rule of thumb to follow when searching for advice? Ask an expert! Read more
Growing your estate without undue market risk and taxes
Often we see older investors shift gears near retirement and beyond. Many become risk adverse and move their assets into fixed income type investments. Unfortunately this often results in the assets being exposed to higher rates of income tax and lower rates of return – never a good combination.
Or maybe the older investor cannot fully enjoy their retirement years for fear of spending their children’s inheritance.
The Estate Bond financial planning strategy presents a solution to both of these problems. Read more
It’s more important than you think
Naming a beneficiary is a valuable feature of life insurance and segregated funds policies so it is important to carefully choose your beneficiaries.
Estate – the default choice
Many people choose to name their “estate” as their beneficiary. Although this is an easy short-term solution, it is important to review the risks of doing this. If you are stuck for a significant “other” beneficiary, don’t forget to change it to a more appropriate option later. Why?
- The proceeds will be subjected to probate fees and the benefits received will be co-mingled with all the other estate assets which may be exposed to various third parties.