CRA confirms that it only applies its position, that there can be only be only one child life insured under a policy at the time of a mooted s. 148(8) rollover transfer, at the transfer time
2004-0065441C6 indicated that the s. 148(8) rollover would not apply to a transfer of a life insurance policy under which more than one person is insured even where all the lives insured meet the definition of child; and 2005-0116681C6 indicated that the rollover is available where there is a joint-last-to-die policy on the life of a parent and child, and the policy is transferred to the child by virtue of the child being the named contingent owner of the policy within the meaning of s. 199(1) of the Insurance Act (Ontario) on the parent’s death, where the child is the only life insured under the policy at the time of the transfer. Further to these positions, CRA commented on the situation where a parent acquires and is the sole policyholder of a joint-last-to-die life insurance policy on the life of a child and the child’s spouse, and the child then dies so that the spouse is the sole life insured.
CRA confirmed that the parent could then gift the policy on a s. 148(8) rollover basis given that there now was only one life insured under the policy who was the “child” (under the extended definition of that term) of the policyholder, or of the transferee.
If, subsequent to the child death, the parent instead named the child’s surviving spouse as the contingent owner of the policy upon death, within the meaning of s. 199(1) of the Insurance Act (Ontario) then, again, the spouse would be the only life insured under the policy at the time of the transfer to the spouse, so that such transfer could occur on a s. 148(8) rollover basis.
Neal Armstrong. Summary of 7 May 2024 CALU Roundtable Q. 3, 2024-1007101C6 under s. 148(8).