Good News For Charities: Gifts Of Life Insurance

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On May 1, 2020, the BC Financial Services Authority (the
BCFSA“) issued Information Bulletin Number INS-20-003, which
clarifies its interpretation regarding section 152 of the
Insurance Act (the “Act“). The
result is that the acceptance of life insurance policies by
bona fide charities in BC is permitted, and will generally
not be considered trafficking in life insurance policies contrary
to section 152 of the Act.

Section 152 of the Act provides:


Any person, other than an insurer or its authorized
agent, who advertises, or holds himself or herself out, as a
purchase of life insurance policies or of benefits under them, or
who traffics or trades in life insurance policies for the purpose
of procuring the sale, surrender, transfer, assignment, pledge or
hypothecation of them to himself or herself or any person, commits
an offence against [the Act].

Prior to this clarification, the concern of the charitable
giving community was that a charity which sought or accepted a life
insurance policy from a donor, or received a benefit on the death
of a donor, would have committed an offence of trafficking contrary
to section 152 of the Act.

The BCFSA considered three common methods by which charities
receive the benefits of life insurance policies from donors:

  1. Where an insured takes out a new
    policy in the name of a charity and receives a tax receipt for the
    premiums the donor pays.

  2. Where an insured names the charity as
    the beneficiary of an existing policy, the charity receives the
    benefits on the donor’s death, and the donor’s estate
    receives a tax receipt.

  3. Where an insured transfers ownership
    of an existing policy to the charity and receives a tax receipt for
    the cash value of the policy.

The BCFSA concluded that none of these three donation methods
are generally prohibited by section 152 of the Act. However, as its
mandate is to protect vulnerable British Columbians, the BCFSA left
open the possibility that it could make a referral to the BC
Prosecution Service if it discovers illegitimate “charitable
giving” or other practices that are harmful to the public.

Originally published 5 May, 2020

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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