7 June 1994 External T.I. 9405745 - GIFTS OF LIFE INSURANCE POLICIES TO CHARITIES

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

1. Whether it is sufficient to make a charity the irrevocable beneficiary of a life insurance policy for purposes of the rules regarding gifts of life insurance policies as charitable donations?

2. Whether more than one charitable organization can be designated as a beneficiary of a life insurance policy?

Position TAKEN:

1. No. The life insurance policy must be absolutely assigned to the donee and an irrevocable designation does not meet this proviso.

2. More than one may be designated, however, it is not possible to assign a life insurance policy to more than one charitable organization.

Reasons FOR POSITION TAKEN:

1. Documents #:E9103237, E9110435

2. Backup to IT-244.

		5-940574
XXXXXXXXXX	C. Chouinard

Attention: XXXXXXXXXX

June 7, 1994

Dear Sir:

Re: Gifts of Life Insurance Policies to a Charity

We are writing in reply to your letter of February 28, 1994 wherein you requested our comments concerning the donation of life insurance policies to registered charities.

Specifically, you have asked whether a life insurance policy will qualify as a charitable donation where a taxpayer names a charity as the irrevocable beneficiary under his or her life insurance policy. In addition, you have inquired whether more than one charitable organization can be named as a beneficiary of a life insurance policy.

Our Comments

Your request for a technical interpretation appears to relate to a situation which arose in respect of a specific taxpayer. As indicated in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990, a request for a written opinion on a completed transaction is generally considered by the taxpayer's local district office. Therefore, while we are unable to provide an opinion in respect of the situation outlined in your letter, we are prepared to offer the following comments.

We note incidentally that your question is with respect to "pure term life policies". As terminology varies, we assume that you are referring to policies that have no cash surrender value.

A gift, including a gift of life insurance policies, is a voluntary transfer of real or personal property from a donor, who must freely dispose of his or her property, to a donee, who receives the property given. As indicated in paragraph 1 of Interpretation Bulletin IT-244R3, provided a life insurance policy has been absolutely assigned to the donee and the donee has become the registered beneficiary of the policy, a gift of a life insurance policy will qualify as a charitable donation pursuant to subsection 118.1(1) of the Income Tax Act (the "Act"). When a donor assigns a life insurance policy in accordance with the terms of the above-mentioned Interpretation Bulletin, he or she is considered to have disposed of that policy pursuant to section 148 of the Act. As a beneficiary under a life insurance policy does not have an interest in the policy, the act of naming a beneficiary does not involve a transfer of property. Therefore, in our opinion, the mere designation of a charity as an irrevocable beneficiary of a life insurance policy would not meet the requirements of IT-244R3.

Although more than one charitable organization can be named as a beneficiary under a life insurance policy, since a beneficiary under a life insurance policy does not have an interest in the policy, the act of naming multiple beneficiaries would not be equivalent to a gift of a proportionate part of the life insurance policy to each such beneficiary. Only an absolute assignment of a life insurance policy will result in the transfer of the life insurance policy to the beneficiary. In order to absolutely assign a life insurance policy, the donor must transfer absolutely, unconditionally and otherwise than as security, all rights, title and interest in the policy. Accordingly, in our view, a life insurance policy cannot be absolutely assigned to more than one registered charity.

Unless as otherwise stated, all references to statute are to the Income Tax Act, S.C. 1970-71-72, c.63, as amended and consolidated to June 10, 1993.

We trust that these comments will be of assistance.

Yours truly,

R. Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch