Questions about 20 year paid up Participating life insurance policies

[basiloil143]

I'm writing this on behalf of a friend as her broker has not been helpful at all and would appreciate any insights or recommendations the insurance community may have.

Background : The father (A) purchased 20 year pd up Participating life insurance policies on his children (X & Y) over 30 years ago, and the mother (Z) is the beneficiary for both. Unfortunately A passed 2 years ago and Z has been trying to get the ownership changed to the kids, the broker keeps dropping the ball.

X's policy appears to just have the dividends accumulate on the policy and a T5 was always issued to A to claim on his income tax. (this will be important later)

Y's policy appears to purchase additional insurance with the accumlated dividends.

Both policies were originally issued with a DB of $10,000, but because of the different treatment of dividends, Y's basic policy benefit has more than doubled, while X's provides only a CV of approxmately half of her basic amount.

Questions:

1. What are the implications (tax or otherwise) of transferring ownership to the kids now?
2. Because of the T5 issued to A on behalf of X's policy, how is it handled if A is deceased?
3. What should be the most beneficial way (for the kids) to deal with going forward? From my limited experience with insurance, Y has a paid up policy that keeps increasing in value and costs him nothing. Z on the other hand is responsible for the T5 income and in essence has less coverage. Can a policy change be done to change the dividend option on X's policy?
4. The broker.... he inherited these policies and has been worse than useless. Contacting the Head office directly has not worked as their customer service is not existent, (looking at you CL).

Many thanks in advance for your observations and advice.

EDITED for spelling error

 

[thetruthseeker1983]

@basiloil143 So, I'll answer this coming from an US point of view so your mileage may vary.

1) In America there shouldnt be much tax implications until the policies are surrended. If they are earning interest there could be taxes in that every year.

2) That's probably more of a tax person question.

3) If the company has different dividend options they could look into changing those. Would need to change ownership first.

4) Could see if there is a different broker in your area and see if they could be moved there.

This is why it's important to have contingent owners on a policy.

Again, I'm answering fro. A US point of answers. So YMMV

 

[basiloil143]

@thetruthseeker1983 Thank you very much, appreciate your input!

I agree, # 2 is probably best addressed by a tax person, will cross post over there.

The current broker stated he will find out if policy can be changed. Given his past performance, nobody is holding their breath waiting for that to happen.

Ideally, a different local broker would be great, except the family in question lives in a less populated part of their province so options may be limited. As it is, the current broker lives about 4hours away... in another province : /