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.
In almost every case the death benefit is not subject to income tax as long as it is left to a beneficiary. If the beneficiary is the estate it will force the proceeds into probate and it will be taxed as an asset with the rest of the estate. This is a costly mistake.
As far as cash value life insurance values. The money paid into the plan premiums is not subject to income tax as it was paid with post tax dollars. If the policy is surrendered or cancelled the gains would be taxed as income. If you leave the policy in force and simply borrow against the value versus surrendering, then all of that money is tax free.
I recommend sitting down with a trusted advisor to avoid costly mistakes to yourself and your loved ones.
That is a great question! Since the money that you use to pay the premiums are paid after taxes, the money paid back to you upon the death of the insured is non-taxable. In almost every case, the beneficiary does not have to report that money on either their State or Federal tax returns. Thanks for asking!
President, Lane Independent Agency, Southern California
Zero. Nada. Nothing of the beneficiary payment is taxable. That is a great advantage for life insurance. You can be sure that everything your carrier will pay will be kept by your beneficiary. If, however, you decide to cancel your life insurance and "cash it in", the proceeds to you over the cost will be taxed as income. Do not cancel your policy. You can borrow against permanent life and keep that loan money tax free. Just do not cancel your policy if you want to avoid taxes! Thank you. GARY LANE.
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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.
As far as cash value life insurance values. The money paid into the plan premiums is not subject to income tax as it was paid with post tax dollars. If the policy is surrendered or cancelled the gains would be taxed as income. If you leave the policy in force and simply borrow against the value versus surrendering, then all of that money is tax free.
I recommend sitting down with a trusted advisor to avoid costly mistakes to yourself and your loved ones.