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Posts from the ‘Life Insurance’ Category

16
Oct

Are Life Insurance Premiums Ever Tax Deductible?

Considering that the proceeds of a life insurance policy are received tax free upon the death of the life insured, it is not surprising that the premiums of the policy are not tax deductible.  There are two circumstances, however, where premiums would be deductible for income tax purposes:

  1. If the life insurance policy is assigned to a lending institution that requires the assignment as a condition for a loan, for either investment or business purposes.
  2. If the life insurance policy is donated to a registered charity and the donor continues to pay the premiums on behalf of the charity.

Life insurance policies used as collateral security for a loan

The conditions under which the owner of a life insurance policy would be entitled to a collateral insurance deduction are as follows:

  • The loan advance must be made by a qualified financial institution that is in the business of lending money. This includes banks, finance companies, trust companies, credit unions or insurance companies.  It does not include private lending arrangements such as with friends or family members; Read more
19
Apr

Life Insurance and the Capital Dividend Account

Many business owners are unaware that corporate owned life insurance combined with the Capital Dividend Account (CDA) provides an opportunity to distribute corporate surplus on the death of a shareholder to the surviving shareholders or family members tax-free.

Income earned by a corporation and then distributed to a shareholder is subject to tax integration which results in the total tax paid between the two being approximately the same as if the shareholder earned the income directly. Integration also means that if a corporation is in receipt of funds which it received tax-free, then those funds should be tax free when distributed to the shareholder.

The Capital Dividend Account is a notional account which tracks these particular tax-free amounts accumulated by the corporation. It is not shown in accounting records or financial statements of the corporation.  If there is a balance in the CDA it may be shown in the notes section of the financial statements for information purposes only.

Generally, the tax-free amounts referred to, are the non-taxable portions of capital gains received by the corporation and the death benefit proceeds of life insurance policies where the corporation is the beneficiary. Read more »

15
Feb

Five Financial Products You Should Own

By Brenda Spiering

1. Registered Retirement Savings Plan (RRSP)

As soon as you begin your working life, you should have a Registered Retirement Savings Plan (RRSP). It’s one of the most tax-effective ways to save for retirement.

You’re allowed to contribute up to 18% of your earned income from the previous year to a maximum of $25,370 for 2016 and $26,010 for 2017. (If you’re a member of a group pension plan, your contribution room is reduced by your “pension adjustment,” an amount you’ll find listed on your T4.)

Contributions are tax deductible, meaning you can net a tidy tax refund while building your savings. Plus, you can turbo-charge your RRSP savings by putting that tax refund back into your RRSP as soon as you receive your cheque. Read more »

15
Feb

Protecting Your Family

Let’s face it, raising a family today can be financially challenging.  The cost of living continues to increase, housing costs are rising along with education and extra-curricular activities for our children.  It is tough to make ends meet and still have something left over at the end of each month.

Most families today require both parents to work to afford the lifestyle they enjoy.  Losing one of those incomes through premature death, illness or a disability is a real risk that many families would have a difficult time facing emotionally and financially.

How do you protect your family? Read more »