If you’re looking for a way to donate to your favourite charity, the proceeds of a life insurance policy can create a donation large enough for them to meet important long-term goals, such as creating a scholarship fund, constructing a building or purchasing equipment.
How to donate life insurance
There are three ways you can donate a policy to a charity. Talk to us to find the one that’s right for you:
- Take out a new policy in the name of the charitable organization. You will receive a charitable tax receipt for the cash value of the policy and for any premiums you pay.
- Name the charity as the beneficiary of an existing policy. A good option if you already have a policy that your family no longer needs for financial stability. At the time of your death, the charity will receive the policy proceeds and your estate will receive the tax benefits.
- Transfer ownership of an existing policy to the charity to receive a charitable tax receipt for the cash value of the policy. If you still owe annual premiums on the policy, you will still pay them, but you will also receive tax receipts in the amount of your payments.
Along with tax savings, the benefits of donating a life insurance policy include the freedom to choose from a full range of products, price ranges and payment options to suit your needs. Your gift cannot be legally challenged, and because life insurance is considered separate from your other income assets, your estate is protected. Your donation is not subject to taxes, probate costs or estate debts, and you can make a substantial contribution through relatively small monthly, yearly, or one-time deposits. At the same time, you’ll be rewarded for your donation through the charitable tax receipts you receive. The premiums on a $25,000 policy will cost far less than the payout amount over time, and when you include your tax credits, you end up paying even less overall for a very sizeable gift.
Having an up-to-date will helps ensure your gift is received
Whatever your age, having an updated will is an important part of estate planning, especially if you’re including long-term charitable gifts. And it doesn’t take much to leave a lasting legacy; if every adult in Canada left only a $100 bequest in their will, charities could count on receiving millions in donations every year. However you choose to distribute your assets, make sure that your will spells out your wishes clearly to save your heirs from estate complications.
Whether you choose to give to a large national organization or a local group, donating a life insurance policy can have a positive impact on so many people in your community. Think of the cause that you are passionate about or is close to you. Do you or your family benefit from a particular organization? Or maybe you want to donate in memory of a friend or loved one.
Your local Co-operators Financial Advisor is ready to help with advice on estate and gift planning, and products to help you reach your goals.
We want to hear from you: visit our Facebook page and tell us about a charity you’ve chosen to donate to using a life insurance policy.