We provide opinions of Fair Market Value for life insurance policies. To request an opinion please fill in this form and provide the documents it requests.

Opinions are usually requested for the purposes of (1) charitable giving; and (2) the sale of a life policy to a corporation. In all cases the value of the policy is sensitive to changes in the health of the life insured since policy issue.

We urge individuals who are requesting an opinion to consider providing medical evidence. While this will increase the cost of the opinion marginally, it can dramatically increase the Fair Market Value. Life insureds may not be cognizant of the significance of certain conditions. For example, a life insured who is overweight with elevated blood sugars may not be a diabetic requiring treatment and may consider themselves to be in good health, but could  be pre-diabetic and have a reduced life expectancy.

If the life insured has an attending physician the physician could be asked to provide a short written summary of the life insured’s state of health. As an alternative to obtaining an attending physician’s letter the life insured could go through the underwriting process, which typically entails a medical or paramedical exam.

An opinion of Fair Market Value can be obtained without providing medical evidence in which case the owner will be asked to sign a waiver of opportunity to provide medical evidence found here, or for a joint life policy, here.

If the purpose of obtaining the opinion of value is for a sale of the policy to a corporation then the benefits of this can be briefly summarized as follows.

1. Receipt of the purchase price of the policy; and


2. Subsequent payment of the policy’s premiums will be made by the corporation in before-tax dollars rather than by the current owner in after-tax dollars.

The following must also be weighed:

1. Tax is payable on the difference between the Cash Surrender Value and the Adjusted Cost Base.
    While not exact, for life insureds under the age of 60, the Adjusted Cost Base may be thought of as
    the sum of premiums paid to date.
2. Unlike a policy held by individuals, a policy held by a corporation is not out of the reach of creditors.
    This issue may be avoided by having a holding rather than an operating company buy the policy.
3. Once owned by a corporation, the policy will be deemed a passive asset of the corporation. This
    may bring into question the status of the corporation as a Qualified Small Business Corporation and
    its attendant capital gains deduction. Passive assets are not to constitute more than 50% of the Fair
    Market Value of a Qualified Small Business Corporation or Family Farm Corporation.
4. There may need to be another valuation of the policy carried out if there is a sale of the corporation,
    a windup of the corporation, a transfer of assets belonging to the corporation, a reorganization, an
    estate freeze, or a marriage breakdown.

Typically, it is advisable for the shareholders to have the intent of retaining the corporation indefinitely.

We do not provide financial advice and the above should not be construed as giving it. We urge policy owners to discuss the benefits and issues of selling their life insurance policies to a corporation with their financial advisors.

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