Categories: News

Important Upcoming Changes to the Life Insurance Policies Legislature

Recently approved Bill C-43 introduced a few important changes to the taxation of disposition of life insurance policies. Generally speaking, starting January 1, 2017 the Adjusted Cost Basis (ACB) of the insurance policies will be higher. It creates three major consequences:

  1. The taxable income on dispositions (surrender and policy loans) of life insurance policies will be lower.
  2. Corporate owned life insurance policy becomes less effective. Higher ACB negatively affects the amount that can be credited to the capital dividend account of private corporations on payment of the life insurance proceeds on death.
  3. New rules will reduce the amount that could be deducted by policy owners if the policy has been assigned as collateral for a loan on which the interest paid is deductible.

Summarizing the changes, we should conclude that the business owners and anybody else who plan on using the insurance policy as a wealth accumulation (or wealth transfer) vehicle have a limited time to take advantage of the current rules – the window closes on January 1, 2017.

If you would like to get more technical details on this issue, please read here.

Lazar Wealth

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