New Tax Rules - January, 2017

Submitted by Krishan on January 9, 2017 - 1:20pm

New tax rules will take effect in January 2017 pursuant to legislative changes introduced by the Minister of Finance and adopted by Parliament. These changes will modernize the exempt test rules for life insurance policies, but policies issued prior to 2017 will be grandfathered. Please note that the new rules apply to all life insurance companies.

Some of the tax consequences of the tax changes:

· There will be less room for tax-sheltered investments in universal life insurance policies.

· The net cost of pure insurance will generally be lower, which will increase the adjusted cost basis. For corporate owned policies, in the event of a premature death, the amount credited to the capital dividend account will be lower, and the amount received by the company tax-free will therefore be lower. If a life insurance policy is used as collateral for a loan for the purpose of earning income from a business or property, the amount of premiums deductible may be lower.

Impacts for you

1. New business opportunities: You can reach out to clients who are currently in a holding pattern for whom it would make sense to perform the transaction in 2016 (before the changes take effect).

2. It will have a major impact on the management of in-force business and the types of changes possible before and after January 2017. You’ll need to keep a close eye on these cases.

We’ve attached a reference document that explains the new tax rules.

Business centre managers and business development managers are aware that you‘ll need help to identify files with potential and good business development opportunities with respect to the changes.

Check back for updates and tools on Webi in the JANUARY 1, 2017 : LIFE INSURANCE TAX REFORM banner.

If you have any questions, please feel free to contact your Regional Sales Directors:

· Canada (except Quebec): https://www.webi.desjardinsassurancevie.com/en/public/insurance/Pages/Responsables-du-d%C3%A9veloppement-des-affaires-%E2%80%93-Assurance.aspx

· Quebec: https://www.webi.desjardinsassurancevie.com/fr/public/assurance/Pages/Responsables-du-d%C3%A9veloppement-des-affaires-%E2%80%93-Assurances.aspx