A wealth replacement trust is a special type of Irrevocable Life Insurance Trust that establishes tax-free life insurance dollars. These assets provide for the benefit of your beneficiaries and replace the assets that were donated to charity with an established Charitable Remainder trust.
To establish a Wealth Replacement Trust, a portion of the income allocated to the Charitable Remainder Trust is used to purchase the life insurance policy to replace the portion of the property that has been allotted to charity. You may also choose to purchase insurance to cover all of the property within the Charitable Remainder Trust.
Once activated, the insurance policy replaced the assets that were allocated to charity through the Charitable Remainder Trust. The Wealth Replacement Trust holdings are then transferred to the beneficiaries tax-free, so there are no estate taxes or probate costs.
An Appropriate Strategy for You?
If this strategy sounds interesting to you, there are a variety of considerations. The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance. Before implementing this strategy, it would be prudent to have the policy approved. In addition, you should seek professional advice from an attorney before establishing such a trust. In many cases, the wealth replacement trust is an appropriate way to preserve family wealth.
For additional information, please contact:
Executive Vice-President, Philanthropy
johno @ ottawacancer.ca
613.247.3527 ext. 227