Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: 2004 Conference for Advanced Life Underwriting, Question 7.
Position: Q&A attached.
Reasons: N/A
CALU - Conference for Advanced Life Underwriting (2004)
Question 7
Deemed Gift of Life Insurance Proceeds if Charity is Irrevocable Beneficiary
Subsection 118.1(5.2) applies where a registered charity is named as a beneficiary of a life insurance policy and the requirements in subsection 118.1(5.1) are met. It deems the death benefit paid to the charity to be a gift made by the life insured immediately before death. One of the requirements in subsection 118.1(5.1) is that, immediately before the individual's death, the individual's consent would have been required to change the recipient of the death benefit. At the 2003 CALU Annual Meeting, in response to Question 8: Charitable Donations of Life Insurance Policies, the CRA stated that this requirement is not met when a charity is named as an irrevocable beneficiary under a life insurance policy. Consequently, subsection 118(5.2) will not apply to deem the death benefit in this case to be a gift to the charity.
Question:
Has the CRA reconsidered its position regarding gifts of life insurance proceeds where a charity is named as an irrevocable beneficiary?
Agency's Response
Yes - the CRA has reconsidered its position regarding gifts of life insurance proceeds where a charity is named as an irrevocable beneficiary. The revised position is based upon our understanding, which has been confirmed by you, that insurance legislation in Canada is generally consistent in its application to irrevocable beneficiary designations, that such designations cannot be changed unless the policyholder and the beneficiary both consent to the change.
Where the applicable insurance legislation requires policyholder consent to change an irrevocable beneficiary designation, our view is that proceeds of a life insurance policy paid to a registered charity pursuant to the irrevocable beneficiary designation would be deemed to be the policyholder's gift to the charity pursuant to subsection 118.1(5.2), provided that the provisions of subsection 118.1(5.1) are otherwise satisfied.
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