J Paul Wilson CFP, CHFC PRO
Certified Financial Planner, JPW Insurance Retirement Investments, Halifax, Nova Scotia, Canada
The death benefit of a life insurance policy is tax free.
In Canada, if the beneficiary is a corporation, the death benefit is received by the company tax free. The amount that the death benefit exceeds that Net Cost of Pure Insurance can be paid out as Capital Dividend to shareholders Tax Free. (Ask for details)
In Canada the cash value of the policy is not taxed as long as the policy remands exempt from accrual taxation. Insurance companies make sure policies remand exempt. The ratio of death benefit to cash value cannot exceed the cash value of a endowment at age 85.
If surrendered the amount that
exceeds the adjusted cost base is taxed the same as interest income. If you borrow in excess of the adjusted cost base you will attract taxation. A deemed disposition can occur on most transfers of ownership. Check with you insurance company to be sure.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
Answered on June 1, 2014