Page 26 - ECF-LIA-June-Summer-2024-flipbook

Generosity Education
Here are a few ways life insurance can be used for charitable donations.
Split the beneficiary on an existing policy - keep 80 per cent (or some percentage) for your intended beneficiary and divert 20 per cent to your favorite charity (the policy must have been in place for a few years).
Splitting the beneficiary:
For charity
For beneficiary
A charitable tax receipt will reflect the 20% donated.
Donate an existing policy - if you no longer need a policy, consider donating it. Have the policy valuated for fair market value (FMV), receive charitable tax receipts for the FMV, as well as future premium payments.
$200,000 policy donated $50,000 FMV
$25,000 tax saved
For example
Donor recognized for $200,000 donation to charity and saves a lot on taxes.
Donate a new policy - The same money paid each month creates a greater impact. Want to turn $60 a month into $100,000? The donor must decide if they want the ongoing annual premium tax credit or the larger tax credit upon death.
$100,000
For example
life insurance policy that lasts for a term of 20 years on a 55-year-old male
Premium:
$60 per month $720 per year
Tax receipt:
$720 for each year $100,000 on death
If CPP income is not needed for lifestyle, use those funds to pay the premium on a new policy owned by the charity, with the charity as the beneficiary. This saves the tax on CPP income as it becomes
a charitable donation and leaves a large donation legacy. As well, you can take the CPP funds, pay the personal tax and purchase a policy that is donated by the family’s estate on death.
For example Purchase a $1,000,000 Joint Last policy.
$20,000 in CPP income
Save $500,000 in tax to the estate.
Charity receives $1,000,000 gift.
26 LEGACY IN ACTION
Donate a policy that would otherwise lapse. Term insurance can become prohibitively expensive
as you age. Consider having the policy valuated, donate it to a charity and receive a tax receipt
for 10 to 50 per cent of face amount. The charity continues to pay the premium. You are recognized for the gift.