Matthew Getzler's article "Tax Planning and Insurance" was published
in Giving Advice, a publication from the Professional
Advisory Committee (PAC) of the Jewish Foundation of Greater
Toronto.
Tax Planning and Insurance
The benefits of life insurance are well known. Its uses range
from family protection in the event of an unexpected death, to
liquidity for funding taxes owing on death, through to being a
simple and tax-effective investment and philanthropic vehicle.
While the rules related to insurance under the Income Tax
Act are very complex, there is one rule in particular that
provides for a relatively straight-forward tax efficient plan.
Generally, when assets are transferred between non-arm's
length persons, the person disposing of the asset is deemed to have
transferred the asset at its fair market value. Tax would be owing
by the transferor on the transfer of the asset to the extent that
the fair market value exceeded the cost base thereof. In
