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.
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.