Canadians may need to rethink their risk management
In a recent study conducted by the Life Insurance and Market Research Association (LIMRA), it was reported that 61% of Canadians hold some form of life insurance. Surprisingly, it also revealed that only 38% of Canadians own an individual life insurance contract.
In another study of middle class Canadians, Manulife reported that 79% had no individual disability insurance and 87% had no individual critical illness coverage.
What both of these studies conclude is that most Canadians rely heavily on their group benefits for their family’s insurance protection. Read more
Permanent life insurance, such as Whole Life or Universal Life, has long been accepted as a tax efficient way of accumulating cash for future needs. Soon the amount of funds that can be tax sheltered within a life insurance policy will be reduced by new tax rules which take effect January 1, 2017. These changes may make 2016 the best year to buy cash value life insurance.
The changes to the tax rules regarding life insurance have resulted in an update to the “exempt test” which measures how much cash value can accumulate in a policy before it becomes subject to income tax.
Highlights of the new rules and their effect
For Cash Value Life Insurance: Read more
Estate, trust and tax planners have long favoured testamentary trusts as vehicles to pass along assets to beneficiaries or heirs. A testamentary trust is generally a trust or estate that is created the day a person dies. Commonly, these trusts are established in a testator’s will.
A significant benefit to testamentary trusts had been that income earned and retained in the trust received the same graduated rate of income tax as an individual tax payer. Unfortunately, under the terms of Bill C-43, after January 1, 2016, all income retained in the trust will now be taxed at the highest rate of tax applicable in the province in which the trust is resident.
There will be two exceptions to this new rule – The Graduated Rate Estate (GRE) and a Qualified Disability Trust (QDT). Read more
The Cascading Life Insurance Strategy
If you are a grandparent wishing to provide an asset for your grandchildren without compromising your own financial security you may want to consider an estate planning application known as cascading life insurance.
How does the Cascading Life Insurance Strategy work?
- The grandparent would purchase an insurance policy on his or her grandchild and funds the policy to create significant cash value;
- The grandparent would own the policy and name their adult child as contingent owner and primary beneficiary;