A loan from a third-party bank or credit union where the borrower assigns a life insurance policy's cash surrender value as collateral. Distinct from a...
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Also known as: Third-Party Collateral Loan
A loan from a third-party bank or credit union where the borrower assigns a life insurance policy's cash surrender value as collateral. Distinct from a policy loan (where the insurer itself lends). Under s.148(9) of the Income Tax Act, a collateral assignment is NOT a policy disposition, so no policy gain is triggered when the loan is taken. Lending limits typically 90% to 100% of CSV for traditional participating whole life, 50% to 90% for universal life depending on investment allocation. Interest can often be capitalized until death, at which point the death benefit repays the loan. Central mechanism behind corporate-owned whole life retirement-income strategies.
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Independent advisor since 2008, focused on corporate investing, tax-efficient wealth strategies, and dynasty planning for incorporated business owners in Québec and Ontario. Mutual funds distributed through WhiteHaven Securities Inc.; insurance through iAssure Inc.
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