What is Canada Life My Par Gift Participating Life Insurance?
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Published on
July 24, 2023
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Statera Financial Planners works with various insurance carriers throughout Canada, but recently a new and innovative, first-of-its-kind, product has come to the market for those with a philanthropic view.
What is Canada Life My Par Gift Participating Life Insurance?
It’s built on these foundations:
- First and foremost, it’s life insurance designed for charitable giving. The registered charity receives the payout on death of the insured person.
- It belongs to the charity. As the owner, the charity controls the policy.
- It’s a single premium payment. The base amount of life insurance is guaranteed to stay in effect for the insured person’s lifetime once the single premium payment is made, or until cancelled by the charity.
- It can help the charity grow its legacy through potential dividends. Dividends can be used in many ways. The charity can choose to buy additional insurance coverage, which may further increase the policy’s cash value and payout on death. Or, they can take the annual dividends as cash.
- It gives the charity flexibility. Over time, the life insurance policy builds cash value. The charity has guaranteed access to these funds, which can be used in many ways during the insured person’s lifetime.
- It has tax advantages for the donor. The single premium payment qualifies as a charitable donation.
Many charities prefer owning the insurance policy for the following reasons:
Control over policy: as a policyowner, Canada Life My Par Gift gives the charity greater assurance that it’ll receive the insurance proceeds. This is because the single premium is used to purchase a paid-up policy. And since no further premiums are required, the policy won’t lapse from non-payment of premiums. Also, this is unlike other methods (i.e donor-owned policy with charity named as beneficiary) where beneficiary designations may change, or the proceeds could pass through the estate and be exposed to other costs or obligations.
Access cash value: as a policyowner, the charity may choose to access the policy’s cash value to fund their charitable initiatives. A policy’s cash value may be accessed through a policy loan, cash withdrawal or by using the policy as collateral for a loan.
Cash value not affected by disbursement quota: as with any life insurance policy, Canada Life My Par Gift policy’s cash value is excluded in calculating a charity’s disbursement quota, which requires charities to spend a minimum amount on charitable activities to keep their charitable status with the Canada Revenue Agency. As such there may be advantages for a charity in holding a life insurance policy in comparison to other investments.
As financial planners, we do not provide specific tax and legal advice. You should always consult your accountant and/or lawyer where necessary. Because of the many ways a strategy may be impacted when segmented, we prefer to communicate collectively with your external professionals to ensure that all recommendations and action plans are in the overall best interest of you, with your professionals working with common goals in mind.
You are never obligated to act on our recommendations of products, services, or advice.