Taxation of Insurance Policies : Tax tips

Changing the ownership of a life insurance policy is considered to be a disposition of the contract for Canadian Income Tax purposes

Changing the ownership of a life insurance policy is considered to be a disposition of the contract for Canadian Income Tax purposes and can result in an income inclusion for tax purposes to the policyholder if the proceeds of disposition, often the cash surrender value, exceed the adjusted cost basis of the policy. However there is tax free rollover to spouses.