Gift of Life Insurance

Invite your clients to give the gift of life insurance.

Many clients want to generously support a favourite charity, but often they feel their heart is much bigger than their pocketbook. Life insurance can be a tax efficient way to leverage affordable monthly payments to establish a relatively large, future gift.

The donation of an existing policy produces a charitable tax receipt for the value of the policy, and any future premiums paid by the donor earn a charitable tax receipt. In the case of a new policy, where the charity is named owner and beneficiary, a tax receipt is issued for the premium payments. When the charity is named as beneficiary only, receipts are not issued for the premiums, but upon death a receipt is issued for the death benefit. This can be helpful as the tax credit is available when a significant tax liability often is experienced due to deemed disposition at death.

Policy types
Not all life insurance policies make beneficial charitable gifts. Consultation with QEII Foundation staff prior to establishing the policy is important so the Foundation is aware of the donor's wishes, and the donor is aware of the Foundation's requirements for accepting life insurance gifts. The policy should be a permanent type of policy, preferably with a limited pay feature. Policies that require the client to pay premiums for life can be a problem should the policy holder, or an attorney acting on behalf of the policy holder, decide later that they no longer want to continue payments. A level premium feature is important. A client who establishes a charitable policy does not want to be told years later that their premiums must increase for the policy to remain in force.

Charity owns policy: Jocelyn is 54. She purchases a Universal Life plan of life insurance for $100,000. The policy is arranged so the plan will be fully paid for after only 14 years. The premium is $2,191 per year but because the QEII Foundation owns the policy, a tax credit of $1,095 is generated (this credit will vary from province to province). The net effect is that Jocelyn’s out-of-pocket cost to greatly benefit the Foundation is only $1,139 per year for 14 years.

Charity is beneficiary of policy: Upon Joe’s death, a tax bill of $250,000 will be owed. Joe is now 55 and he would rather have funds go to the QEII Foundation. He buys $500,000 of life insurance at about $7,600 annually, and names the Foundation as beneficiary. Upon Joe’s death the $500,000 goes to the Foundation tax free; the resulting tax credit from the gift is used to eliminate his tax bill.

CRA recently made significant changes to the valuing of the donation of existing policies.  To discuss valuation for receipting purposes, please contact us at 902 334 1546.

Wealth Replacement
Life insurance can also be used to replace wealth in your client's estate. For parents who may wish to make a substantial, immediate gift to charity but are concerned about reducing their children's legacy, a policy could be purchased to pay a pre-determined amount to their children or the estate on death. This effectively replaces the amount of the immediate gift for the heirs. In some cases the policy can be paid for entirely by the tax credit from the original cash donation.

Need an example? Ruby is 74 years old, has acquired blue chip stocks over the years with significant capital gains, has a good pension and liquid assets. She wants to support the QEII Foundation’s campaign with a $100,000 gift. She is also aware of the tax implications for her estate from her stock portfolio on her death. Her advisors suggest she contribute $100,000 from her liquid assets and use the resulting tax credit to offset the premium cost of a life insurance policy. The policy will pay the death benefit to her estate to help offset income taxes owing. This will be of benefit to her heirs and she is able to see her gift go to work immediately.

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Have questions? Contact us:

Charles O'Neil: 902 442 7196
Lori Scott: 902 442 7199
Katharine Berrington: 902 442 7146

Charles O'Neil, Katharine Berrington and Lori Scott image

Resources for your practice

Professional Advisors Guide
A guide for financial advisors - CAGP
Ten articles that will make a difference in your practice.

Survey and report
CAGP report link
Understanding advisors' approaches and clients' perspectives.

The QEII Foundation inspires generosity to advance health care at the QEII Health Sciences Centre. With financial support from all levels of the community, the Foundation helps fund new technologies, research, innovation and education that contribute to life-changing moments experienced every day by patients and their loved ones.

 

 

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Contact Us

QEII Health Sciences Centre Foundation
5657 Spring Garden Road
Park Lane Mall, Suite 3005, Halifax, Nova Scotia B3J 3R4
Phone: 902 334 1546 | Toll Free: 1 888 428 0220
Fax: 902 442 7172 | Email: info@qe2foundation.ca

Charitable Business No: 88646 3496 RR0001

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