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Combining charitable giving and life insurance

Combining charitable giving and life insurance

Are you thinking of making a significant donation to a charity when you exit this world? Life insurance is a resourceful planning technique that can offer additional benefits now or later. Depending on your personal goals and your situation, there are several ways to use an insurance policy for charitable donations.

The first is through your will. In this scenario, your property is listed as a lifetime beneficiary, universal life or term insurance policy. After death, your property receives a tax-free payment from the insurance company. The charity gets an inheritance based on the instructions set out in the will and provides a charitable tax receipt for your property. As a result, the property tax is reduced, leaving more funds available for your heirs.

A similar strategy is to designate a charity as a recipient of the policy. When you are no more, a tax-free payment is made for the organization, which issues a tax receipt for your property. The good thing about this approach compared to the first is that insurance revenues avoid ownership and avoid inheritance expenses.

For families, an even better approach would be to appoint their heirs as beneficiaries of the life insurance policy and leave a legacy in their will for charity. The advantage it comes with is the certainty that your loved ones will receive a minimum and tax-free payment from the insurance company immediately after their death without having to wait for the liquidation of their property. The funds also prevent succession and are protected by any claim on the property. Similarly, if you have assets within an RRIF or RRSP and no spouse benefits from a tax-free transfer or any other activity, you can appoint the institution as a beneficiary of the plan and then make use of a life insurance policy to provide for family members.

With any of the strategies listed above, you can change your mind at any time in your life if your situation or your desires change. But if you can engage in a charity, you can immediately enjoy the financial benefits. One such strategy is to give an existing permanent insurance policy to a charity and continue to pay the premiums. As a new beneficiary and policy owner, the charity gives you an immediate tax equal to the cash redemption amount less any loan made on the policy. Furthermore, every year you receive a payment receipt from the charity for the total premiums you pay annually. Upon death, the charity gets the proceeds of the insurance but does not issue an additional tax receipt for his property.

A variation of this strategy is to organize a new life insurance policy for your life and appoint your property as a beneficiary. After issuing the policy, transfer the property to a charity, which is then called a beneficiary. Once again, he continues to pay prizes and receives a receipt every year, but he no longer receives tax breaks after his death.

The immediate tax benefits of promising insurance benefits for a charity during its lifetime can be significant. For example, if your insurance premiums are $ 800 a month, the tax credit you receive at the end of the year reduces the monthly cost to around $ 426. Remember to receive a tax credit for policy ownership before transferred to charity. Sometimes a combination of the donation strategies described above is appropriate. In most cases, the life insurance policy can be removed from the life of a spouse or the last of the two to die. You can see that with some planning and optimal use of a life insurance policy, you can make your generosity go further.

Going further, you can create a Charitable Remainder Unitrust (CRUT) where you can provide valuable resources. The CRUT would pay the donor a certain amount each year until the donor dies, after which the remaining assets in the CRUT would be distributed to Charity. The donor could use all or one

Tax Benefits

A gift to a registered charity provides you or your property with a federated-provincial tax credit of around $ 50 for the first $ 200 in a given year and 45 cents for each additional dollar.

In some cases, life insurance premiums may qualify for a tax credit in the paid year

The insurance income received is tax-free.

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