Kerry J. Cooper, CEA
Senior Advisor, Estate and Insurance Planning
Leaving a Legacy through Charitable Giving
Planned Charitable Giving
Planned gifts are more essential than ever to organizations working to enhance our collective quality of life. For some individuals, planned giving is at the nexus of philanthropy, estate planning, and strategic tax planning. As part of an overall estate plan, clients, their advisors, and their chosen charity or charities can work together to develop a planned gift strategy that meets the donor’s philanthropic objectives, maximizes the tax relief, and is of optimal benefit to the charity.
Canadians are increasingly stepping forward to fill the gaps in funding created by today’s economic realities. Planned giving is a form of stewardship for the future. It is a way of showing you care, whether it is for a social or religious institution, community facility, the arts, or for education and research.
Canada’s charitable tax credit rules allow you to optimize your tax savings and estate plan. The gifting of a life insurance policy can be an attractive option for you as a prospective donor. Planned giving is an important part of estate planning. It ties together philanthropy, estate planning, and strategic tax planning.
Don’t assume that planned giving is a rich person’s game. Even if you consider yourself to be of modest financial means, a little careful planning can help you meet your charitable objectives and provide you with optimal tax relief, while also benefiting your chosen charity.
However, before making a charitable donation, speak to your tax advisor to ensure that the gift is structured so that it will result in the maximum benefit both for you and the charity.
Planned Giving Strategies
Planned giving with insurance is a popular way to fund charitable gifts, and in many cases, it is the most economical and effective method available to ensure that all the donor’s estate planning objectives are achieved.
Since there are many potential strategies for using insurance for charitable gifts it is important to confer with an insurance professional prior to implementing these strategies.
Purchase an insurance policy & name the charity as beneficiary of the policy
One method of making a charitable gift is to purchase an insurance policy and name the charity as beneficiary of the policy. If the donor retains ownership of the policy, then the payments of the premiums will not be deductible, but at death, the death benefit will result in a tax receipt issued in the name of the donor at the time of death. If the charity is the owner of the policy, then every premium payment will be eligible for charitable donation tax credit in the year the premium payment is made.
Use your minimum RRIF withdrawal funds to make the premium payments on a life insurance policy
When you are required to withdraw minimum annual payments from your RRIF but you don’t require the funds, consider using the funds to make the premium payments on a life insurance policy. If the charity is owner of the policy the charity will issue a tax receipt for the premiums to offset the income inclusion as a result of making withdrawals from your RRIF.
And More!
Another insurance strategy is donating funds to a charity to use the tax savings to purchase a life insurance policy that will replenish your estate at death for your beneficiaries.
And there are more options! Talk to your Acumen advisor today.
Redirect regular donations into a charity owned life insurance policy
If you’re making regular annual donations, consider redirecting the amounts into a charity owned life insurance policy. The annual cost you to you will remain the same and you will continue to benefit from the tax credit, but it is possible the total amount received by the charity will be much higher if the premium funds a large death benefit.
Make your estate the beneficiary of your insurance policy and then make a bequest in your will to the charity
Another option is to make the estate the beneficiary of your insurance policy and then make a bequest in your will to the charity.
Facts about the Charitable Tax Credit
When you donate to a registered charity, you will receive both a federal and provincial tax credit. Alberta’s combined charitable donations tax credit is one of the highest such credits in Canada. As an example, Albertans can receive up to a 50% non-refundable tax credit for every dollar donated when combined with the federal credit. The tax credit reduces a taxpayer’s amount owing or increases the amount being refunded.
Remember to speak to your tax advisor to ensure that the gift is structured so that it will result in the maximum benefit both for you and the charity.
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