X-Message-Number: 17839
Date: Sat, 03 Nov 2001 10:41:34 -0500
From: Ben Best <benbest@benbest.com>
Subject: Urban Legend about Canadian cryonics insurance
Several months ago I was informed by a Canadian life insurance
agent, Tony Taylor, that he had received a letter from Alcor
informing him that Canadian life insurance policies payable to
an American beneficiary are taxable. Alcor had sent him the letter
in connection with his efforts to secure insurance for a Canadian
woman seeking to join Alcor. Tony attended our Pool Party in July
and said that he would mail me a copy of the letter. When I did
not hear from him I e-mailed him and he did not respond to my e-mail.
I also asked my own life insurance agent, who has handled a
number of cryonics life insurance policies and who is normally
very well informed about these matters. After long delays and
lots of checking, she couldn't provide a substantive answer. I also
checked websites such as sites for Canadian snowbirds, but was
unable to find anything in their insurance sections. If such a tax
were applicable, I should expect to find it mentioned there. It can be
easier to find information confirming truths than information
dispelling misbeliefs -- if this is, indeed, a misbelief.
I phoned the International Tax Services Office of Revenue Canada
(1-800-267-5177) and my call was re-routed to the Non-Resident's
Withholding Accounts Division (1-800-267-3395). A person in that office
informed me that there is a 25% withholding tax on all Canadian life
insurance policies that have a non-resident beneficiary. When I asked
him for a specific reference, he gave me a specific citation to
Section 212 of Part XIII of the Canadian Income Tax Act.
However, when I went to the library and tried to find the specific
reference he gave me, I could not find it. The citation was
non-existent and didn't even make sense. The next day I again phoned
the Non-Resident's Withholding Accounts Division and spoke to a
different person. After consulting her supervisor the clerk informed
me that Section 212 of Part XIII only refers to non-residents living
in Canada, but that the withholding tax would affect neither a
non-resident deceased nor beneficiary since proceeds on life insurance
are not part of what is taxable for a Canadian. I was transferred to a
clerk handling Part I of the Income Tax Act.
The person handling Part I of the Act also did some double-checking
with a supervisor and ensured me that Part XIII does not apply to
life insurance. Section 212 (1) specifies that the withholding tax law
requires non-residents to pay taxes that a Canadian would have to pay,
but that since a Canadian would not pay taxes on life insurance proceeds
a non-resident is not subject to this tax (whether living in Canada or
not).
I can understand that anyone reading this might feel less than
100% assured that there is no withholding tax on Canadian life
insurance having a non-Canadian as beneficiary. The fact that a
government clerk supported the idea upon first enquiry give pause
for wonder. Moreover, I know of no case in which a Canadian
has received cryopreservation which was paid through insurance, so
it would seem that the idea is untested. But I find it hard to believe
that my own agent would not know of it, that 2 clerks and 2 supervisors
in the tax bureau would not know of it, that there could be no specific
passage in the Tax Act on the subject, that there would be no mention of
it on websites for Canadian snowbirds -- if in fact it were true.
I still don't know how the idea arose at Alcor, perhaps concern
about law in some other country. Even if it is true and easily verified
(in MY mind) that there is no tax on cryonics insurance for Canada, I
can easily understand and sympathize with cryonics organizations
worrying
about the proceeds they might receive from insurance paid from different
countries. Taking on a cryonics patient is a large cost, and if adequate
funding is not in place for that patient and the organization is left
with a financial burden, it endangers the funding (and ultimately the
lives) of all the patients.
It is one thing to accept members from different countries and tell
those
members that they are responsible for whatever laws might impede proper
cryonics
treatment or shipment of their bodies. It is quite another thing for a
cryonics
organization to assume that funding will be adequate for insurance
without
having to thoroughly research the laws of every country in which they
have
members to ensure that significant taxes or charges will not be
withdrawn
or that enforcement problems might occur if the insurance company
defaults.
This experience and these thoughts should be very sobering for anyone
who
has formulated opinions about American cryonics organizations accepting
members from other countries.
-- Ben Best (http://www.benbest.com)
Director, Cryonics Society of Canada
(http://www.cryocdn.org)
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