Mr. A donates a universal life insurance policy on his life that includes a return of premiums on death (ROPD) rider, which provides for the payment of an additional premium to the required base premium for the life insurance portion and allows for the payment of an additional benefit following the death of Mr. A equalling the total premiums paid. Mr. A continues to pay the annual premiums, a registered charity holds the policy and is the beneficiary of the death benefit, and Mr. A.'s estate is the beneficiary of a benefit equalling the total premiums previously paid (the ROPD benefit).
After noting that IT-244R3, para 2 stated that premiums on a life insurance policy held by an eligible donee, paid directly by an individual at the request of, or with the concurrence of, the donee, are considered to be a gift, CRA stated that the “premium for the ROPD rider will not be a gift where the beneficiary of the benefit payable on death under the ROPD rider is not an eligible donee.” CRA also indicated that “Generally, a beneficiary of a life insurance policy (who is not otherwise the policyholder) does not have an income inclusion when receiving a benefit from a life insurance policy as a consequence of the death of the insured.”
CRA also noted the potential application of s. 248(35) where Mr. A instead was the policyholder until his death, and the registered charity received the death benefit – without providing particulars.