The budget announced March 22, 2016 has proposed changes that impact the insurance policy transfer strategy to personal corporations unfavorably. We are waiting for legislation to be drafted before commenting further. In the interim, please give us a call to discuss.
The cash surrender value of a life insurance policy is an offer from an insurance company to ‘buy back’ an insurance policy from the owner. It is based on assumptions and other factors that were in effect when the policy was issued.
The FMV of a life insurance policy can be much higher than its cash surrender value for one or more of the following reasons:
- The insured’s health may have deteriorated since the policy was issued;
- The cash surrender value structure established by the insurer; and
- External factors such as changes in interest rates.
There can be considerable tax implications by arbitrarily setting the FMV of an insurance policy to its cash surrender value.
Providing Fair Market Assessments
Lesniewski Moore Consulting Group Inc. can provide an actuarial estimate of the fair market value of a life insurance policy.
Why Fair Market Valuation?
The FMV of a life insurance policy may be required for one or more of the following reasons:
- Transfer/sale of a policy to or from a corporation;
- Surrendering a policy into personal wealth;
- Gifting a policy to a charitable organization;
- Division of property on spousal death or due to marital breakdown;
- Tax planning;
- Estate planning;
- Immigrating and emigrating; and
- Corporate reorganizations
The process and method used to determine the FMV of an insurance policy can be complicated and may vary from one policy to another.
Each case must be analyzed on its own merit with the cash surrender value being only one of the many variables that must be considered. Examples of other factors are as follows:
- Type of policy;
- Face Value of policy;
- Current policy value and rates;
- Past and future premium payments;
- Insured’s life expectancy;
- Insured’s age and health factors;
- Conversion privileges;
- Replacement value;
- Policy loan value; and
- Other policy terms (e.g., term riders and double indemnity provisions).
Insurance Valuation Overview
Insurance Policy Valuation Data Form
Fair Market Valuation – Steps to Completion
Lesniewski Moore Consulting Group Inc. Quote
Lesniewski Moore Consulting Group Inc. can provide an actuarial estimate of the FMV of a life insurance policy.
Please fill out the attached FMV Data Form and send it to a Lesniewski Moore Consulting Group Inc. consultant. We will then send you a quote, usually within 48 hours.
Also attached is a copy of our FMV Handout. Feel free to print a copy.