The Benefits of Charitable Giving with Life Insurance!
Charitable giving with life insurance
We may naturally want to give back to our community if we’re successful. It may be a surprise that life insurance plans provide the perfect solution to allow you to make a substantial gift to your community or a cause your cherish. Here are some ways you could make a difference using life insurance as a charitable gift while minimizing your tax burden.
How could this work for me?
- Designate the charity as beneficiary on a new or existing policy. The insured’s estate will receive a charitable tax receipt for the face amount of the policy. The charity receives a substantial donation and the tax deduction can be applied by the estate in the year of death and carried back to the preceding year.
- Transfer a new or existing policy to the charity with a pledge to pay the premiums each year. You receive a charitable tax receipt for the amount of premiums paid each year. No receipt is issued for the proceeds of the life insurance on the death of the insured.
- Buy a life insurance policy equivalent to the value of your RRIF or RRSP and designate the charity as beneficiary of the RRIF or RRSP. On death, the charity issues a charitable tax receipt which offsets the tax impact of the RRIF proceeds.
- Wealth Replacement Insurance. This creative option allows donating a large asset or lump sum of money to charity. Receive a charitable credit for the donation which results in tax savings for the year the donation is made and then invest these tax savings in an insurance policy that potentially results in enough proceeds to replace the value of the gifted property.
Benefits of this insurance strategy:
- You or your estate benefit from income tax relief now or in the future.
- Life insurance amplifies the amount of your charitable gift.
- Your charitable gift does not impact the bequests to your family. With no need to earmark a portion of your estate for charity, it remains intact for your family.
- You have the satisfaction of knowing you are giving something back to an alma mater, local hospital or preferred charity.
- You can create a lasting memorial to your life or the life of a loved one.