Three Benefits to Giving Through Life Insurance
Most often when we think of donating to charity, we think of it in the form of a direct contribution. However, more Canadians are thinking differently about how and when they can make the greatest positive impact on their favourite charities. The donation of life insurance is an approachable way to transform existing life insurance premium payments into a substantial future donation, not to mention the possible tax savings.
In this article, we outline some of the top ways to use life insurance to make a gift to charity and how a charitable foundation like Gift Funds Canada can enable donors to make a significant gift upon death – often larger than what might be possible in life.
Options for every giving strategy
Like many giving vehicles, donating through life insurance can be done in a variety of ways depending on a donor’s unique giving strategy. A gift of life insurance can typically be done in two ways — through the creation of a new life insurance policy, or through an existing policy. In the case of a new policy, the donor simply purchases the policy in the name of the charity or foundation they wish to support. With an existing policy, the donor would have the name of the beneficiary changed to the charity or foundation they wish to support. To make the most of a charitable gift through life insurance, and take advantage of possible tax benefits, it is a good idea to consult a professional adviser.
Unlike gifting a life insurance policy directly to a charity, naming a charitable foundation as the beneficiary of a policy gives the donor more flexibility to choose the charities their gifts will support. This is done through a donor-advised fund that can grant available funds to the charities indicated by the donor in life. And, donors have the flexibility to change their recommendations at any time. The donor may also choose to split the proceeds of the policy between charitable and non-charitable beneficiaries. All this flexibility ensures that whatever the giving intentions, a donor can be assured their legacy plan is executed in accordance with their wishes.
Potential for bigger gifts
While many of us think of making a donation in one lump sum, in many cases donors can give substantially more through life insurance than they could with their available cash. This is possible because their premiums will purchase a much larger ultimate benefit over time than most donors can afford to give. As a result, when the owner of the policy is a charitable foundation, all or a portion of the premiums are eligible for a donation receipt. This makes the gift more affordable and often results in a bigger gift amount to the charity the donor wishes to support.
A gift of life insurance made through a charitable foundation presents donors with an opportunity to make a significant future gift to their preferred charity or other beneficiary, while enjoying tax savings now and in the future. It is an economical way to give a larger gift at a fraction of the ultimate value compared to a lump sum donation. And, a gift of life insurance is an ideal way for donors to support a specific area of interest at the charity of their choice, at a level that may not be possible by any other means.
For more information about gifts of life insurance, please visit giftfunds.com