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15 Cards in this Set
- Front
- Back
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When can a policy be taxed?
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At disposition (accumulated value)
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Fundamental difference in life insurance taxation?
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Before or after December 2nd 1982
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Why are policies prior to 1982 better?
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Better tax benefits - accumulated value is sheltered from taxation as long as funds remain on deposit.
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What can lead to disposition of life insurance policy?
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1 - policy surrender
2 - maturity 3 - policy loans 4 - policy lapse 5 - paymen of policy dividend 6 - conversion of policy into annuity contract 7 - if policy no longer exempt and no measures taken to regain exemption status 8 - policy assignment 9 - transfer of ownership |
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When does disposition of not trigger taxation
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When amount is equal or less than adjusted cost base
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Can policy be converted into annuity contract without it representing a disposition?
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1 - conversion made by same insurer
2 - according to contractual settlement option 3 - policy before december 2nd 1982 |
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What changes can be made to a policy from prior to december 2nd 1982 without changing status?
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1 - beneficiary
2 - rating class 3 - adding waiver 4 - premuim payment frequency 5 - additional insurance 6 - premium amount |
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Two types of policies since December 2nd 1982
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Exempt and non-exempt
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What is exemption test?
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relationship between cash surrender value, protection amount and number of years
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After 1982, pass the exemption test =
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taxed at disposition
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Advantage of having a company hold a life insurance policy?
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net cost of income tax on premium is less
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What is Capital Dividend Account (CDA)
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to record various surplus amounts exempt from income tax that a company can accumulate and distribute
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Net proceeds of a life insurance policy?
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difference between benefit paid at death and the policy's adjusted cost base
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Universal life insurance policy since 1982 are sheltered from tax, as long as...
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investment fund does not exceed ETP or at disposition
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Can life insurance be taxed at death?
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NO
....unless policy is not exempt and the gain accumulated as not yet been taxed. |
