Death and Taxes: Life Insurance Taxation Changes

The two usual certainties are death and taxes - but there are changes taking place as of January 1, 2017 that will affect the taxation of certain life insurance contracts. The primary changes are as follows:

Policies issued in 2017 or later: The new rules will affect the savings inside Participating and Universal Life insurance policies. While the cash value inside the policies will continue to grow on a tax-sheltered basis, the new rules may reduce the maximum amount of such savings.

Policies issued prior to 2017: Policies issued prior to 2017 will generally remain subject to the same rules as when they were issued. However, if you make changes to such a policy in 2017 or later, it may become subject to the new rules.

Private corporations that currently hold life insurance policies: Corporations are able to distribute the majority of the life insurance proceeds to shareholders as tax-free dividends. For policies issued in 2017 and later, the amount distributable in this manner will be reduced.

If you would like further information about these changes and whether they will impact you, do not hesitate to contact us and we would be happy to answer any questions you may have.

For more information, please contact David Scrivens.