Life insurance policy

Summary policy

Date
October 25, 2002

Reference number
CSP-L02

Key words

Life insurance policy – Individual Planned giving

Policy statement

When an individual absolutely assigns^{Footnote 1}  a life insurance policy to a qualified donee (QD) and makes the QD the irrevocable beneficiary of the policy, the individual has made a non-cash gift to the QD. 

Consequently, the QD will need to consider the deemed fair market value (FMV) rules if it chooses to issue an official donation receipt to the individual. According to these rules, the FMV of the policy for receipting purposes will generally be the lower of the FMV of the policy otherwise determined and the policy’s adjusted cost basis immediately before the gift is made. 

Amounts donated to a QD to enable the QD to pay the premiums of the life insurance policy are treated as charitable gifts. In addition, policy premium payments made directly to the insurance company, either upon the request of the QD or with their agreement, are also considered a charitable gift and may be receipted. The amount of advantage, if any, in respect of the gift must also be considered in determining the eligible amount of the gift. 

References

• Definition of “adjusted cost basis” in subsection 148(9) of the Income Tax Act
• Sections 248(30) to 248(41) of the Income Tax Act, inclusive
• Interpretation Bulletin IT-244, Gifts by Individuals of Life Insurance Policies as Charitable Donations
• Registered Charities Newsletter, Issue No. 27
• Information Circular IC89-3, Policy Statement on Business Equity Valuations