There’s a laundry list of fantastic benefits for donors and charities with gifts of life insurance. The most obvious benefit is that life insurance gifts let donors significantly multiply their gifts to their favourite charities using the same dollars that they otherwise would donate anyway. Much larger donations allow charities to significantly improve their mission and impact. Win-win.

Because of this, we find it tragic that the British Columbia Financial Services Authority (BCFSA) ruled that no BC charity can promote, accept or solicit gifts of a life insurance policy, nor can any charity anywhere accept gifts of life insurance from BC residents.

The remaining bright spot is that there’s a general consensus that BC charities can still continue to accept the proceeds from a privately held life policy for which they are named as beneficiary.

There are some pressing unanswered questions about what set off the BCFSA to write to one or more BC charities, asking that BC charities stop promoting gifts of insurance, and to specifically post information that BC residents cannot make gifts of insurance:

1. Did these BC charities do something illegal in British Columbia, such as purchasing and taking over the ownership of a donor’s policy? Although this practice is only legal in the provinces of Quebec, New Brunswick, Nova Scotia and Saskatchewan – and is normally used for other purposes – Canadian charities have not typically used this method of acquiring ownership of life insurance policies.

Or

2. Did the BCSFA suddenly just shut down what are otherwise commonly accepted practices by charities – legal in every other province or territory – to ask for and take over the ownership of existing policies (whether the charity pays for ongoing premiums, the donor does, or the policy is self-funding)?

In fact, according to the CRA, soliciting for the donation of new or existing life insurance policies as gifts is perfectly legal. It is expected that the CRA will respond to the BCSFA at some point in time, however there’s been nothing said to date.

Canadian life insurance companies themselves are also very much in favour of gifts of life insurance to charities. The exception is the practice of purchasing existing life policies and changing ownership of those policies, which is completely prohibited by some companies, regardless of which province or territory the transaction may occur within.

Naturally it is discouraging that the BCFSA has suddenly and without warning shut the door on potentially hundreds of millions of dollars in gifts of life insurance without any known prior consultations with all the parties involved. These gifts are obviously transformative for so many donors and their favourite charities.

Though there is some amount of fear that the BC ruling on accepting gifts of life insurance may spread to other provinces in Canada, at this point there really doesn’t appear to be any appetite for that at the provincial or federal government levels.

In the meantime, a group of very strong and vocal national organizations including the Financial Advisors Association of Canada (Advocis) and the Canadian Association of Gift Planners (CAGP) are continuing to lead in the fight against the BCSFA ruling and though the timing is uncertain, a positive outcome is expected.

Although British Columbia is hopefully only temporarily closed to gifts of life insurance, Bequest Insurance continues to encourage financial advisors and charities in other provinces and territories to continue to actively pursue these highly beneficial gifts. Though it may take some time for more clarity on this issue, it will come sooner rather than later.

Jack Bergmans is a Certified Financial Planner ®/CFP® President and founding partner of Bequest Insurance. He is the co-author of Ripple Effect (for financial advisors) and Multiplying Generosity (for charities). The books are must have resources for learning more about the outstanding benefits of gifts of life insurance for donors and charities.