Gift of Life Insurance


Life insurance is the one asset almost everyone has. For the young parent with limited dollars, it is a way to protect the family against economic loss in the event of a parent’s premature death. For the business owner, it may provide dollars to buy out a deceased partner’s interest or compensate for the loss of a key manager. For older individuals, it provides the liquidity needed to settle an estate and pay taxes. Life insurance has another important use: it is a popular and practical way to make a significant gift to The Couchiching Conservancy.

Gift Examples:

  • Any whole life policy
  • Many term policies
  • Many group insurance policies

Benefits to the Donor

  • Donation receipt for cash surrender value and any future premiums* paid on policies where the ownership is transferred to the charity.
  • Small current outlay leveraged into larger future gift.
  • If policy ownership rights retained by donor during lifetime and charity named as beneficiary: donation receipt to estate for full value of death proceeds.
  • Satisfaction of providing a future gift while retaining full control of policy.

Most Appropriate for

    • Persons (generally ages 30-60) who:
      • have an older policy no longer needed, or
      • want to make a large gift but have limited resources
    •  Persons (any age) whose personal needs and family situation may be subject to change
    •  Professionals with good cash flow, but limited capital assets.

* Advisors may want to suggest that donors use gifts of appreciated stocks to the charity to fund the premium payments as a way to take advantage of the preferential tax treatment.


Charity is designated owner and beneficiary  
Mr. Palayew gives a charity a paid-up policy with a face value of $100,000 and a policy value of $48,000.
His adjusted cost base in the policy is $20,000.
Donation receipt 48,000
Tax credit (assuming 45%) 21,600
Taxable income ($48,000 - $20,000) 28,000
Tax on income 12,600
Tax savings ($21,600 - $12,600) 9,000
Charity is designated as beneficiary    
Ms. Aziz would like to make a significant gift to The Couchiching Conservancy and has a $100,000 life insurance policy that no longer has a specific purpose and is evaluating whether to continue the policy and pay the annual premiums and gift the proceeds to the charity. Her net income in the year of her death is expected to be $200,000.
  No insurance $ Insurance $
Net income 200,000 200,000
Tax (assuming 45%) - 90,000 - 90,000
Donation tax credit - 45,000
After-tax position of estate 110,000 155,000
Gift to charity - 100,000
Total value to estate and to charity 110,000 255,000
      The donor must also consider the annual cost of the policy premiums.

For illustration purposes a combined tax rate of 45% was used. Please note that combined tax rates vary across the provinces.

Note to reader: The purpose of this information is to provide general information, not to render legal advice. In addition any changes in the tax structure may affect the examples listed in this information. Your client should consult their own lawyer or other professional advisor about the applicability of this information to their situation.