Perspecta Investment Loan Program with Standard Life (6152)

Perspecta Investment Loan Program
How it works
Policy loan repayment –
Interest
On or before each policy anniversary, the client
must pay the amount of interest due on the
outstanding loan. This payment, made by cheque,
must indicate that it is for interest payment, along
with the appropriate policy number.
In order for the interest to be potentially eligible as
a tax deduction, it should be paid “out-of-pocket”
and during the policy year.
Should the interest payment not be received by
the policy anniversary date, a partial surrender,
in the same amount of the interest payable, can
be processed upon the client’s request. This will
be a taxable disposition. In the early policy years
there will be little or no tax payable due to the
high ACB of the contract. In later years, as the ACB
decreases, all, or virtually all, of this disposition
will be subject to tax. If a payment is not received
and no partial surrender is requested, the interest
on the loan will be capitalized.
Policy loan repayment –
Principal
There are a number of options available for clients
to repay the policy loan principal.
1. Loan repayments can be paid in cash from the
client’s own resources. This should be identified
as such by the client on their cheque.
2. The policy’s “un-loaned” cash value can be
used to pay part or all of the loan balance,
depending on the policy cash value at the
time. This option may trigger unintended tax
consequences.
3. At death, any outstanding loan will be
deducted from the death proceeds and the
net amount will be paid to the beneficiary(ies).
There are no adverse tax consequences as the
death benefit payment is non-taxable.
Loan repayments and interest payments are not considered deposits into the policy and therefore, do
not generate commissions.
For additional information on policy loans and their tax treatment, we refer you to the Taxing Issues
document entitled Policy Loans (PC 6140), available on Advisor Source at www.advisors.standardlife.ca.
Standard Life 6