Lifetime gift annuity

A lifetime gift annuity allows a grandparent to leave a long-term reminder of themselves to their grandchild while the grandparent is alive and after the grandparent has passed away. The reminder comes in the form of lifetime income, payable every year on the grandchild's birthday. The income comes from a joint life annuity purchased by the grandparent, set up so the grandparent and grandchild are the annuitants and income is paid to the grandchild for the grandchild's lifetime.

The grandparent, as owner of the annuity, is responsible for paying tax on the income but directs the income to be paid to their grandchild. As the owner, the grandparent also makes the grandchild the contingent owner so when the grandparent passes on, the grandchild becomes owner of the policy.

The lifetime gift annuity is not restricted to grandparents; a parent may also purchase a lifetime gift annuity for a child. To simplify the explanation that follows, we only refer to a grandparent and grandchild.

Annuity set up

Annuity type Joint life annuity
Source of premium Non-registered funds only
Tax treatment Accrual
Policyholder (and taxpayer) Grandparent
Contingent policyholder Grandchild
Annuitants Grandparent = Annuitant
Grandchild = Joint annuitant

Grandparent or Grandchild*

*We advise against naming a minor joint annuitant as a payee.

Payment frequency Annual
Payment date Grandchild's birthday (or date of policyholder's choice)
Payment start date The start of income may be deferred up to 10 years from the purchase date.

When the grandparent passes on

  • Ownership moves to the grandchild as contingent policyholder.
  • Income continues to the grandchild and the grandchild becomes responsible for paying tax on it.
  • Tax treatment continues as accrual unless the annuity qualifies for prescribed taxation. If it qualifies, the tax treatment will automatically change to prescribed, unless the contingent policyholder requests accrual treatment continue.

Illustrating a lifetime gift annuity

A lifetime gift annuity can be illustrated using the Payout Annuity Income Illustration tool.

Completing the application

Please complete the application according to the following instructions. If you do not follow these instructions the results may not be what was intended.

Section Instruction
Contingent policyholder

Make the grandchild the contingent policyholder.

  • If a contingent policyholder is not designated, when the grandparent dies ownership of the policy will pass to the grandparent's estate. The estate may or may not be able to direct the income to the grandchild or transfer ownership to the grandchild.
  • If the grandchild is not made the contingent owner, the annuity will not qualify for prescribed taxation when the grandparent dies.
Payment information

In subsection Payee, choose the option Annuitant while living, then the joint annuitant (if applicable).

The grandparent can choose to change the payee at any time e.g. when a minor grandchild reaches the age of majority.

If the grandchild lives in a different province

The advisor should complete the application in person with the owner and send the application to the joint annuitant to be signed. The advisor must explain to the joint annuitant what the contract is, why the signature is required, and that the joint annuitant is not gaining any control over the contract by signing the application.

Important: If the grandchild is under age 18

If the grandchild is under age 18, please consult a legal expert before purchasing the annuity. The laws governing a minor's role in an insurance contract vary between jurisdictions and in some cases are neither clear nor well-defined. All parties should clearly understand what will happen if the grandparent should die while the grandchild is under age 18.