Canadians are generous with their time, skills, energy and money when it comes to supporting charitable initiatives in their communities.
Canada has more than 15,000 charities and not for profit organizations requiring ongoing support to keep our communities and society running. During some time in our life, many of us or our loved ones, will need to tap into the resources some of these organizations offer. Whether to support us through an illness, or help us in a rough patch, sometimes we all need a hand.
Perhaps that simple understanding is why people give to support the causes important to them. For this reason, many of us include charitable giving as part of our financial plan. Charitable giving can take place during our lifetime and even once we have passed.
While we are still alive, we work with our financial advisors to make sure we contribute when and how we want to the charitable initiatives important to us. A financial advisor will work with you to monitor the amount you currently donate and how to continue or enhance your contributions into the future.
The notion of continuing our charitable giving after our death is one many of us may not have considered. For some people the opportunity to carry on their philanthropic endeavours even after their death is important to them.
If charitable giving – today and in the future – appeals to you, life insurance is one of the most effective ways of doing so. There are two primary ways to use life insurance policies for charitable giving:
- the charity is designated as the owner and beneficiary of the policy on the insured or;
- the insured is designated as the owner with the charity designated as the beneficiary.
Each of these options have different advantages for you and the charity. A financial advisor can help determine which is best for you.
Benefits of Using Life Insurance for Charitable Giving
• Doesn’t tie up assets today as the gift is deferred until after death
• Leaves funds free to produce income during your lifetime
• Enables you to make a substantial gift in the future while paying smaller premiums today
• Tax credit choice: you can structure the policy to receive a charitable tax credit annually or a charitable tax credit for your estate
• Personal fulfilment from supporting a cause you believe in
Benefits to Charity
• Receives larger gift than may have through a cash donation
• Possibility for future planning based on knowledge of future gift
• Prompt payment of proceeds to charity
The alternatives for gifting life insurance policies can be flexible to meet your specific circumstances, including:
Gifting an Old Policy to a Charity: If you have a policy you no longer need, you can gift it to your favourite charity.
Buying a New Policy for the Charity: This can potentially provide a large gift relative to the premiums paid. Since the charity is the owner and beneficiary of the policy from inception, the life insurance death benefit will not be part of your estate.
Changing a Policy Beneficiary to a Charity: You can designate a qualified, registered charity of your choice as the beneficiary for a portion or the entire proceeds. This allows you to retain control of the policy because you remain the owner. The owner’s estate receives a full charitable estate deduction for the amount donated to the charity.
Life insurance is becoming increasingly popular as a means of continuing to give. In fact, many charities have resources for people considering this option and are happy to work with you and your financial advisor to make sure your wishes are known and implemented. Check out this infographic showing some statistics about charitable giving in Canada. If you would like to talk to a financial advisor about enhancing your philanthropic endeavours using life insurance, connect with us.