FALL CONFERENCE

Workshop


Tuesday, November 22
@ 1:30pm – 2:30pm ET

Spousal trusts and life Insurance: What you don’t know can hurt you

When was the last time you reviewed the typical powers provided to the trustee’s of a spousal trust? If you take a close look, usually by the time you get down to number 3 or 4 of the 25 to 30 item list, you will probably stumble on to:

5.3 Life Insurance: To apply for and purchase alone or jointly with any other person, as an authorized investment of the trust fund, life insurance on the life of any person

Based on several interpretations issued by the Canada Revenue Agency (CRA) over the past 15 years, it would be a good idea to consider the implications of this power. This is because the CRA takes the view that the ownership and funding of life insurance premiums by life interest trusts will result in such trusts not qualifying as a life interest trust. In fact, the CRA’s perspective is that the mere power (rather than a duty or obligation) to use trust capital or income to pay insurance premiums is sufficient to disqualify the rollover of property to the life interest trust.

The implications of a “tainted life interest trust” are likely not going to be desirable, consider:

  1. There will be no rollover of capital property into the trust. Therefore, the settlor will be deemed to have disposed of property at FMV; and
  2. The 21-year rule may result in realized gains prior to death of the life interest beneficiary

This creates significant issues for clients who would be relying on the liquidity generated by future life insurance death benefits to fund accrued tax liabilities. If these liabilities were assumed to be created at the time of the passing of the last surviving spouse, how will they be effectively funded on a current basis without life insurance proceeds?

The objective of this session is to help members better understand the current perspectives of both the CRA and CALU as it pertains to life interest trusts and life insurance. In addition, the session will:

  • Provide guidance to members highlighting implications for current arrangements and future planning;
  • Review strategies to structure the ownership, premium payments and/or beneficiary designations to ensure that life insurance will be available to a trust to cover tax liabilities that arise on the death of the life interest beneficiary; and
  • provide an update on recent developments on this issue.

Technical, Practice management; Advanced

This workshop is organized by the Life Insurance Issue Group.

CE Credits

The following list of CE credits available, subject to course approval (T = tentative)

  • Institute for Advanced Financial Education (Advocis) – 1.00(T)
  • FP Canada – 1.00(T)
  • Alberta Insurance Council – 1.00(T)
  • Insurance Councils of Saskatchewan – 1.00(T)
  • Insurance Council of Manitoba – 1.00(T)
  • Chambre de la sécurité financière (Québec) – 1.00(T)

Speakers

Adam Shapiro, CLU, CFP, FEA, TEP, CPA,CA
Partner
Chronicle Wealth
View Biography

TICKETS

Conference Registration

Early Bird registration will be open until Friday, October 21. Registration closes after Friday, November 18.

Register Now!