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Rethinking IFAs: What Accountants Should Consider After Bill C‑59
Print Version The recent GAAR amendments enacted through Bill C-59 mark a turning point for Immediate Financing Arrangements (IFAs). While previously tolerated due to sequencing and legal form, these leveraged insurance strategies could now be exposed to reassessment on the basis of economic substance and purpose. For accountants advising clients with IFAs—or considering one—the deductibility…
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The End of an Era? Why GAAR Now Puts Premium Financing on Shaky Ground
For years, Immediate Financing Arrangements (IFAs) have been promoted to high-net-worth Canadians as a tax-efficient way to fund permanent life insurance. The model relies on a simple premise: pay a large insurance premium out of pocket, then obtain a loan secured by the policy to “replenish” that capital. Rinse and repeat. The borrowed funds are…
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A Tale of Two Policies – The Impact of Policy Structure on CDA
When evaluating corporately held life insurance policies, many focus solely on the death benefit and premium schedule. However, two policies with identical premiums and death benefits can result in vastly different net value to your estate. The key difference lies in how each policy impacts the Capital Dividend Account (CDA) and the portion of proceeds…
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The New GAAR and Its Impact on Insurance Planning: Reassessing the Viability of Financing Premium
In the realm of high-net-worth insurance planning, Immediate Financing Arrangements (IFAs) have emerged as a popular strategy. These arrangements allow policyholders to purchase life insurance while simultaneously obtaining a loan to cover the premium payments, with interest payable on the outstanding loan until death. The key attraction of IFAs is the ability to deduct the…
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Understanding Cash Surrender Value (CSV) Tax Implications in Canadian Life Insurance Policies
When planning for life insurance in Canada, it’s crucial to understand the concepts of Cash Surrender Value (CSV) and Adjusted Cost Basis (ACB). These elements play a significant role in the tax treatment of life insurance policies, impacting both individuals and corporate policyholders. Here’s an in-depth look at how they work and their implications under…
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