Articles

Before The End of The Year…

While the end of the year might still be months away, you should be thinking about strategies that could generate tax advantages or might simply be prudent.\

Read More…

Health Care Availability and Accessibility For Travellers

As global travel expands to the far reaches of the world, be aware that medical care outside of Canada is increasingly uncertain.

Read More…

Canada Pension Plan Complexities

Most Canadians over the age of 18 are impacted in some way by the Canada Pension Plan (CPP), either as a contributor or benefit recipient.

Read More…

Elder Financial Abuse

We hear and read stories about elderly people being physically abused, but seldom do we hear or read about financial abuse that occurs just as frequently.

Read More…

Changing Tax Rules For Life Insurance

By R.A. (BOB) Challis, CFP, RHU, TEP, The Nakamun Group, Winnipeg

On January 1, 2017, Canada Revenue Agency will apply new income tax rules that relate to permanent, participating, whole life, and universal life insurance policies issued on or after that date. Generally, those issued before the beginning of next year will not be affected, unless certain changes are made to the existing policy. The new tax rules will result in possible increased cost of these types of life insurance, higher investment income tax, and less room for tax-advantaged value inside the policy over the long term. Policies owned by a corporation will have lower capital dividend account values, which ultimately lowers the tax-free amounts that are distributed to shareholders.

Tax Changes for Insured Annuities

The taxation of prescribed annuities will also change, neutralizing the benefits of an insured annuity. This currently popular strategy involves purchasing a life annuity in order to generate a guaranteed income for life, and at the same time, acquiring a permanent life insurance policy with a death benefit equal to the life annuity. The intent is for cash fl ow from the annuity to finance the annual premium cost while providing net after-tax income that generates pre-tax annual yield greater than the required annuity withdrawal. At the time of death, the annuity income ceases and the original capital is returned to the estate via the life insurance death benefit. Once the 2017 tax rules come into effect, insurance premiums will increase, as will taxation of prescribed annuities, thereby reducing overall net yields.

Window of Opportunity

if you are thinking of life insurance as a part of an overall estate plan, please talk to your Nakamun Advisor soon to ensure you take maximum advantage of the current tax rules. For some, waiting for the new tax rules might be advantageous.