Insurance Beneficiary
From a tax point of view, there are no tax savings during life. The charitable tax receipt is issued to your estate and is often used to eliminate taxes otherwise due at the time of your passing.
Utilizing insurance planning can create a very sizeable gift. It presents a great way to give much more than what you would ever be able to afford to give during your lifetime. Often, we will show clients that their many, small annual cash donations could instead be used to pay the premiums on a life insurance policy that would create a huge planned gift at the time of their passing.
For instance, say Sheila and Robert, a 65 year old couple, have an existing $150,000 joint-last-to-die universal life insurance policy on their lives. The current beneficiaries are their two children. They are maintaining this policy so that the children won't have to personally fund an excessive tax bill when both Sheila and Robert pass on. As the years have gone by, Robert has suffered from emphysema and they have decided that they would like to leave a $25,000 gift to the Canadian Lung Association. One way of accomplishing this is to add the Canadian Lung Association as a co-beneficiary on the existing policy. Alternatively, if Sheila and Robert wanted to keep the existing policy intact for their children, the most effective way of accomplishing the goal is to take out a $25,000 permanent insurance policy on Sheila's life, as she is in good health, with the Canadian Lung Association as the beneficiary. She will pay approximately $750 per year to maintain the policy, a total of $12,750 through age 82, to create the $25,000 gift.
Naming a charity as the beneficiary of a life insurance policy is a great way to create a sizeable gift. Let us guide you as to the most effective charitable giving strategy for your goals and financial circumstances.
