Donate for Free
We call this our "Donate for Free" strategy. Your cash donations and charitable tax receipts are combined with life insurance to create a gift that ultimately will cost you nothing.
This strategy can work for anyone at any age but is most often considered when couples or individuals are more seriously thinking through their retirement and estate plans. Basically the way it works is as follows. A cash amount is determined that the couple wishes to give to charity either annually or on a one time basis. The charitable tax credit creates reduces taxes that would otherwise have to be paid to the CRA. The tax money saved is then used to fund a life insurance policy that will pay back the entire donated amount at the time of your passing. An example will more effectively show what can be achieved.
Say a 60 year old couple reviewed their retirement plan and dearly want to give $2,500 a year to the charity. Their annual gift of $2,500 will create a $1,100 charitable tax receipt. Figuring they will both live until age 80, their plan shows they will have left $50,000 to charity over 20 years. Planning to implement a "Donate for Free" plan, the couple takes out a $50,000 joint-last-to-die Universal Life policy on their lives with the $700 annual premium funded entirely from the tax refund created by the $1,100 charitable tax receipt. When the couple pass away at age 80, the insurance policy will pay back the $50,000 donated entirely. In summary, in implementing this charitable giving plan, the couple will be fully reimbursed for the $50,000 donated to charity; they will have funded the insurance premiums entirely from the tax refund, and will have still kept $400 of the tax refund for other personal uses each and every year. The couple will have "Donated for Free". The couple will have created a wonderful, sizeable gift for their chosen cause without any impact on their final estate.
There are many alternative versions of the "Donate for Free" charitable giving strategy. For instance, it can be a particularly effective strategy for those that come into a large sum of money through inheritance, bonus, severance arrangement or other. Use of the "Donate for Free" strategy will use dollars, that otherwise may be lost to a one time major tax bill, to support a cause you believe in now with the donated amount recovered later to pass on to your loved ones via your estate plan.
You truly can make a huge difference for a charity of your choice. It is truly humbling what our clients, with modest means, can accomplish. Contact us and we'll evaluate what giving strategy meets your goals and financial plans most effectively.
