Mark Garcia and Angela Ramos

Question 1

Universal life Insurance

Are contributions tax deductible?
Is investment growth tax deferred?
Can investments be changes within the plan tax free?
Can investments within the plan/policy remain tax sheltered when changing plans/policy
Can contributions be made to the plan for life?
Are Proceeds paid out tax free?
Can funds be left in plan to grow tax deferred for life?
What are contribution limits?

Answer 1

a type of permanent (whole) life insurance that offers more flexibility

• periodic reviews and adjustments
• flexibility of face amounts and premium deposits
• investment accounts
• flexibility to make changes on coverage, premium deposits, and investments

Are contributions tax deductible?
No, after tax income

Is investment growth tax deferred?
yes

Can investments be changes within the plan tax free?
yes

Can investments within the plan/policy remain tax sheltered when changing plans/policy
No investments cannot be changed, the entire policy must be collapsed

Can contributions be made to the plan for life?
yes

Are Proceeds paid out tax free?
yes

Can funds be left in plan to grow tax deferred for life?
yes

What are contribution limits?
Limits are set based upon the contract and calculated based on several factors

Question 2

Canada Education Savings Grant (CESG)

Answer 2

Under $47630- 40% on first $500
$47630-$95259- 30% on first $500
Over $95260- 20% on first $500

If the beneficiary is 16 or 17 you only receive CESG if:

• Minimum $2000 contribution has been made and not withdrawn from RESP before the beneficiary turns 16
• Minimum of $100 contribution has been made and not withdrawn from RESP in any 4 years before the age of 16

Must start to save for RESP before the end of the calendar year the beneficiary turns 15

Question 3

What are 2 options if children do not attend post-secondary education

Answer 3

1. Transfer to RESP
   - must have contribution room available
   - CESG must be refunded but any investment income earned on CESG will be apart of RESP
   - RESP must be in existence for 10 years the beneficiary must be at least 21 and not receiving EAP
   - No tax on any amount transferred to RRSP but if there is no room than any extra will be taxed at MTR plus 20% penalty
2. Take out as cash
   - CESG refunded but any investment income will remain
   - No tax on what is contributed to RRSP but cash will be taxed at MTR and additional 20% tax