Enhance Your Charitable Giving
Published in November 2020
Many Canadians value the benefits that their local hospital, school, university, church or synagogue brings to their lives and to those in their community, particularly to the less fortunate. Most if not all of us have given our time, energy and resources to make a difference. My charitable efforts have focused on the goal of finding a cure to Parkinson’s Disease through the scientific research at UBC and our volunteer-run charity PPRI, while Barbara and her dog Walle spend time with young patients at BC Children's Hospital through the St. John Ambulance' Therapy Dog program, when COVID rules permit hospital access to volunteers. Yes, Walle went as "Super Dog" this Halloween.
To impact charitable giving throughout Canada even more, Legato has joined a team of financial and life insurance advisors across the country with the goal of raising $$ millions in charitable donations, nation-wide. By offering our professional expertise and advice, our goals include helping these donors magnify their charitable contributions such that their donations result in even more significant legacies in Canada’s charities. While the federal and provincial governments provide generous tax incentives to encourage individuals to support charitable institutions, the tax-exemptions and credits of the life insurance industry can also benefit almost every situation.
The easiest life-insurance-based charitable situation begins when the donor has a term life insurance policy that they no longer need. Instead of letting the policy lapse, the donor uses that policy in one of three ways to double or triple their contribution to the charity, all within the normal guidelines of Canada’s life insurance industry and rules for charitable contributions. If the donor does not have an existing life insurance policy that can be used, a new policy can be put in place.
Enhance your charitable giving through Legato or one of our partners. Join our nation-wide effort so can we can all support our charities to become a little stronger, now and for years to come.
Don Anderson
Legato...for Life
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Here are some details of each of the three alternative paths:
o An individual donor who donates the policy to the charity.
o An individual donor who keeps ownership of the policy and names their charity as beneficiary.
A corporation that donates a policy to their favourite charity:
To impact charitable giving throughout Canada even more, Legato has joined a team of financial and life insurance advisors across the country with the goal of raising $$ millions in charitable donations, nation-wide. By offering our professional expertise and advice, our goals include helping these donors magnify their charitable contributions such that their donations result in even more significant legacies in Canada’s charities. While the federal and provincial governments provide generous tax incentives to encourage individuals to support charitable institutions, the tax-exemptions and credits of the life insurance industry can also benefit almost every situation.
The easiest life-insurance-based charitable situation begins when the donor has a term life insurance policy that they no longer need. Instead of letting the policy lapse, the donor uses that policy in one of three ways to double or triple their contribution to the charity, all within the normal guidelines of Canada’s life insurance industry and rules for charitable contributions. If the donor does not have an existing life insurance policy that can be used, a new policy can be put in place.
Enhance your charitable giving through Legato or one of our partners. Join our nation-wide effort so can we can all support our charities to become a little stronger, now and for years to come.
Don Anderson
Legato...for Life
=================
Here are some details of each of the three alternative paths:
o An individual donor who donates the policy to the charity.
- Owns a life insurance policy on their own life.
- Donates that policy to a charity with which they have a prior history of charitable donations.
- The charity converts that term policy to a permanent life insurance policy.
- Donates the premium payments till the policy is “paid up”. This is typically done within the first ten years.
- Claims a tax credit for the fair market value of the policy (the policy must be appraised by an independent actuary) and includes the policy gain, if any, in income.
- Combined total of 20.06% up to $200 in one year for the value of the policy
- 15% federal tax credit and 5.06% provincial tax credit.
- Combined total of 43.7% over $200
- 29% federal tax credit and 14.7% provincial tax credit.
- Combined total of 20.06% up to $200 in one year for the value of the policy
- Claims a tax credit for all life insurance policy premiums paid after the donation.
- After the policy has been paid up, the annual dividends provide a yearly cash flow to the charitable organization that can last for decades until the insured person(s) dies and the policy is paid out.
- At the insured person’s death, the death benefit is:
- Paid tax-free to the charity.
- Not treated as a donation.
o An individual donor who keeps ownership of the policy and names their charity as beneficiary.
- Owns a life insurance policy on their own life.
- Names a charity with which they have a prior history of charitable donations as the beneficiary.
- Converts the term policy to a permanent policy and funds the premium payments till the policy is “paid up”. This is typically done within the first ten years.
- There’s no deduction or tax credit for any premiums paid (even if the charity is named as an irrevocable beneficiary).
- The death benefit is treated as a charitable donation made immediately before the insured person’s death. A tax credit is available on the insured person’s final return for the year of death and for the year before death.
A corporation that donates a policy to their favourite charity:
- Owns or obtains a life insurance policy on a key person’s life (such as a shareholder’s).
- Donates that policy to a charity with which they have a prior association.
- Deducts the fair market value of the policy from the corporate income as a charitable donation.
- Continues to pay the premiums.
- Deducts from corporate income all life insurance policy premiums paid after the policy donation has been made.
- After the policy has been paid up, the annual dividends provide a yearly cash flow to the charitable organization that can last for decades until the insured person(s) dies and the policy is paid out.
- At the insured person’s death, the life insurance death benefit is:
- Paid tax-free to the charity.
- Not treated as a charitable donation.