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Wealth concept

A legacy that matters, without shrinking the inheritance

You want to support a cause beyond your lifetime without reducing what you leave your family. Life insurance creates a major gift from modest premiums, and the tax credit funds part of it.

  • Gift multiplied versus premiums
  • Tax credit during life or at death
  • Family inheritance preserved
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Which coverage interests you?

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Planned giving with insurance

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SOMMET PROTECTIONWhat matters deserves our full attention.
The issue

A bequest in a will draws on the inheritance and arrives after the estate is settled. Giving during life reduces your capital. Many donors give up a meaningful gesture for fear of running short or disadvantaging their children.

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The solution

  1. 1

    Structure 1 — the charity owns the policy

    You buy a policy and transfer ownership to the charity. Each premium paid is a donation earning you an annual tax credit. At death, the charity receives the capital.

  2. 2

    Structure 2 — the estate gives the capital

    You remain owner and name the charity as beneficiary. At death, your estate gets a tax credit of up to 100% of income for the year of death and the prior year — often enough to erase the RRIF tax.

  3. 3

    Choose by your tax profile

    High income today: structure 1. Large tax expected at death (RRIF, gains): structure 2. The advisor compares both.

  4. 4

    Replace the gift for the family

    A second policy, or the tax credit itself, can compensate heirs: the gift costs the family nothing.

Typical case (illustrative)

A 55-year-old woman wants to leave $500,000 to a hospital foundation. A $500,000 permanent policy costs her about $9,000 a year for 20 years — $180,000 in premiums — a significant share of which comes back as tax credits if the charity owns the policy. The final gift is worth nearly three times what she paid, and her family inheritance stays intact.

Illustrative: premiums and credits depend on age, health, income and tax rules. Validate with your accountant.

Who it is for

  • People committed to a cause, foundation or community
  • High-income taxpayers seeking tax credits during life
  • Holders of large RRIFs anticipating a big tax bill at death
  • People without direct heirs, or wanting to balance family and cause
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A cause close to your heart?

A partner advisor compares both structures and quantifies the tax credit for your situation.

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Traditional bequest vs planned giving with insurance

Cost to the family
Bequest in the willReduces the inheritance by the amount given
Gift through insuranceModest premiums; inheritance preserved
Amount the cause receives
Bequest in the willWhat is left after tax and fees
Gift through insuranceGuaranteed, tax-free capital outside the estate
Tax credit
Bequest in the willTo the estate only
Gift through insuranceDuring life (structure 1) or to the estate (structure 2)
Timing
Bequest in the willAfter settlement (months)
Gift through insuranceA few weeks

Common mistakes

  • 01

    Choosing the structure without looking at tax at death

    A credit at death can be worth more than an annual credit if the RRIF is large. It must be quantified.

  • 02

    Not informing the charity

    A surprise gift can be poorly handled for tax or administration; a written agreement settles everything.

Points to consider

  • Structure 1: the gift is irrevocable; the charity owns the policy.
  • Structure 2: you keep control, but the credit benefits only the estate.
  • Confirm the charity is a qualified donee and accepts this type of gift.
  • Coordinate with the will so the intention is clear.

The concepts presented are for information only. They rely on current Canadian and Quebec tax legislation, which may change. Sommet Protection gives no financial, tax or legal advice: the analysis is done by a partner financial security advisor, together with your professionals.

Frequently asked questions

Can the charity use the policy before my death?

If it owns it, it could in theory surrender it for its cash value; reputable charities commit in writing to keep it. A gift agreement sets expectations.

Can I change charities?

With structure 2 (you remain owner), yes, at any time. With structure 1, no: the gift is made.

Guide · 12-minute read

Transfer more, pay less: the guide to wealth life insurance in Quebec

What owners of companies, real estate and substantial portfolios should know before their next estate review.

Read the guide
  1. 7 chapters
  2. 1. The bill nobody plans for
  3. 2. Four ways to pay — only one at a discount
  4. 3. The estate bond: turning an investment into an inheritance
  5. 4. Holding company: the most rewarding case
  6. 5. Equalization, planned giving and trusts: the lesser-known uses
  7. 6. Choosing between participating and universal
  8. 7. The mistakes that cost the most

The concepts

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