The Federal Government has passed into law certain changes to Universal Life (UL) Insurance Policies that will significantly curtail the amount of money that can be invested and tax sheltered within these policies. Robert Roby and Betty-Anne Howard had a recent conversation to discuss this in more detail along with why this is such an important issue to be addressed by certain of our clients.
Robert Roby: As our insurance specialist please tell us more about these tax changes, why this is so important and who should be thinking about looking into this in more detail, as an appropriate tax planning strategy.
Betty-Anne Howard: Let me start by simplifying what's going on. As of 2017 the amount of money that can be invested inside a Universal Life (UL) insurance policy will be significantly reduced. The reason this is so important is because investments inside these policies can grow tax sheltered and depending on the purpose of the UL (ie. to supplement your retirement income, or to leave a legacy for your family or your favourite charity) this can add up to very significant tax savings both during the accumulation phase and also potentially can result in the entire amount being invested along with the growth being paid out tax free! Clearly the government and CRA see the current rules governing UL policies as being way too generous and therefore are making these changes effective in 2017. We have quite a sense of urgency right now to get these policies issued to take advantage of the tax savings allowed within existing policies and any policy that is issued prior to January 1, 2017.
Robert: I understand your sense of urgency as it can take months to get an insurance policy issued and you obviously wouldn't want to leave this until later this Fall.
Betty-Anne: That's right Bob which is why we're trying to get the word out so we can have the discussion with our clients and get the applications in prior to September 1/16, just to be on the safe side because if the policy gets issued January 2nd 2017, for example, then you won't be able to take advantage of this current opportunity. You'll still be able to have some tax deferral room but it will be significantly reduced.
Robert: Who would you say are the most appropriate clients for this type of strategy?
Betty-Anne: I would say, from my perspective, first of all anyone who is looking for additional tax deferral opportunities. In other words, if you're already maximizing the Tax Free Savings Account (TFSA) and other tax deferral vehicles and, you have additional money to invest.
Business owners who have Holding Companies and money sitting inside their Hold Co and are wondering how they can get that money out of their corporation, in a very tax efficient manner.
Professional Corporations who are in a similar situation to what I just described above for Business Owners.
I also have clients who put one of these policies in place for their ten year old daughter for estate planning purposes, as a very effective wealth transfer strategy.
Robert: We work with a diverse group of people and having a look at this opportunity with us would be a good place to start the conversation about whether this is an appropriate consideration.
Betty-Anne: Yes I want to get the word out to as many people as possible so we can see if this would be a beneficial addition to the financial life planning they are doing with you.
Robert: I recommend that my clients treat this with priority. In order to facilitate additional information in a convenient and timely manner, Betty Anne will call you for a brief 5 minute telephone discussion, at which time you can determine if there is any interest on your part.
There is no obligation, no selling or pressure just great information.
Please contact Betty-Anne directly at www.makingdreamsareality.ca
