| Effective January 1st, 2017, the taxation of life insurance policies will change requiring a distinction of policies issued under the current (G2) or new (G3) tax rules. This bulletin provides further clarity about important dates and transition rules that advisors should keep in mind as we transition to a new suite of products under the G3 rules. New Business Applications Received by November 1, 2016, WITHOUT a Temporary Insurance Agreement (TIA) The last day to submit applications for our current (Wave 32.1) suite of life insurance products is November 1, 2016. These applications must be in good order and all of the requirements to complete our underwriting decision must be received at our Head Office by November 18, 2016. This includes items such as age/amount requirements, attending physician statements and financial statements. Every attempt will be made to issue as many of these policies by December 30, 2016 in order to qualify for the G2 tax rules. New Business Applications Received After November 1, 2016 We will process new applications received after November 1, 2016 on a best-efforts basis. This means that the policy could be subject to the new tax rules, if they are subsequently issued on or after January 1, 2017. Any of these applications which are not approved by December 30, 2016 will be given the option for coverage to be issued under one of the available plans on our new Wave (version 33.0) illustration software. In these cases, new illustrations will be required for universal life policies. Extension for New Business Applications Received WITH a TIA To help your clients ease through this transition period and still qualify for the G2 tax treatment on their policies, we would also like to announce the following criteria for any Wave 32.1 life applications accompanied by a TIA. If a Wave 32.1 life insurance application is received by December 16, 2016 and also meets all of the following conditions, the G2 tax rules will still apply:
Note: Any application received for insurance over $1 million or where the life insured does not qualify for a TIA must be approved and issued by December 30, 2016 in order to qualify for the G2 tax rules. All applications received after the end of business day on December 16, 2016 will be processed under the new G3 tax rules. In Force Policy Changes The same rules and deadlines mentioned above apply for any in force policy changes which could cause a loss of grandfathering such as (but not limited to) the following:
Availability of the Wave (version 33.0) We expect to have a new version of the Wave available for download on November 21, 2016 with our updated life insurance plans which will follow the new G3 tax rules. This includes:
Further details about the scope of this release will be communicated when the software becomes available for download from our website (bmoinsurance.com/advisor). We will start accepting applications for and begin underwriting these new plans once the new software is available but these policies will not be issued until January 1, 2017 at the earliest. In the meantime, you may continue to use the current (Wave 32.1) illustration software, keeping the above deadlines in mind. Backdating You can backdate a policy date to save age as per our business rules. However, note that policies issued under the new G3 tax rules (i.e. those on the new Wave 33.0) cannot be backdated any earlier than January 1, 2017. Note: The information described here is general in nature and should not be construed as legal or tax advice. Each policyholder’s financial circumstances are unique and they must obtain and rely upon independent tax, accounting, legal and other advice concerning the structure of their insurance, as they deem appropriate for their particular circumstances. BMO Life Assurance Company does not provide any such advice to any policy owner or insurance advisor. |