Gifts of Life Insurance

A gift of a life insurance policy can enable a donor to make a large donation at a relatively small cost.

A charity, in this case the Battlefords Union Hospital Foundation, could, with the agreement of the donor, take out a life insurance policy on the donor’s life, with the donor agreeing to pay the premiums directly to the life insurance company. The Battlefords Union Hospital Foundation can then issue a tax receipt to the donor for the amount of the premiums that he or she pays. On the death of the donor, the Foundation will receive the death benefit.

Alternatively the donor could take out the life insurance personally (naming the Battlefords Union Hospital Foundation as the beneficiary) but there would be no tax advantage during the life of the donor, since the premiums are paid on something the donor continues to own. Until the Federal Budget 2000, there was no provision to permit a charity to issue a tax receipt under this arrangement to either the donor or estate when the death benefit was paid out. The Budget now recognizes that the process is simply another donation method and as a result, the issuance of a tax receipt is permitted.

Other donors may wish to make their estate the beneficiary of the policy, and include a charitable bequest to the BUH Foundation in the will in the amount of the part or all of the expected proceeds of the policy. The Foundation would then issue a charitable receipt to the estate when the proceeds are paid over.

Another alternative is for the donor to make a gift of an existing life insurance policy to Battlefords Union Hospital Foundation. The Foundation could then issue a charitable receipt for the fair market value of the gift, usually the cash surrender value of the policy, and the donor would also receive a tax receipt for any future premiums that they may pay.

[ Property, including securities and real estate ] [ Creation of Residual / Remainder Trusts ] [ Bequests ]

In all cases we suggest that a donor obtain advice from legal advisors.