REFERENCE: E2005-011668 1
DOCUMENT TYPE: Conferences
DATE: 2005-05-03
AUTHOR: Maley, Robin
SUBJECT: Transfer of Joint Last-to- Die Policy
Principal Issues: Application of subsection 148(8) where a child and the child's parent are the only lives insured under a last-to-die policy, the parent dies and the child is the contingent owner of the policy within meaning of subsection 199(1) of the Insurance Act (Ontario).
Position: Subsection 148(8) applies to the transfer of the policy from the parent to the child.
Reasons: At the time of the transfer, the child is the only life insured under the policy.
CRA PUBLICATIONS: E9618075
ITA REFERENCE: 148(8)
HAA: 1250-13
SECURITY: For distribution
CALU - Conference for Advanced Life Underwriting (2005)
Question 7
Transfer of Joint Last-to-Die Policy
Will subsection 148(8) apply where a child is the contingent owner of a policy within the meaning of subsection 199(1) of the Insurance Act (Ontario), the policy is a last-to-die policy, the child and one of the child's parents are the only lives insured under the policy and the parent dies?
Agency's Response
If the child receives the interest of the parent policyholder in the last-to-die policy for reason only that the child is the contingent owner of the policy within the meaning of 199(1) of the Insurance Act (Ontario) and the parent has died, it is our view that the child is the only life insured under the policy at the time that the parent's interest in the policy is transferred to the child. Provided that the child acquired this interest without consideration, it is our view that subsection 148(8) would apply to the transfer of the policy from the parent to the child, such that the deceased parent would be deemed to have disposed of the policy, immediately before the transfer, for proceeds of disposition equal to the adjusted cost basis of the policy to the parent, and the child will be deemed to have acquired an interest in the policy at a cost equal to those proceeds.