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 or annual payments to establish a relatively large, future gift.
The donation of an existing policy produces a charitable tax receipt for the fair market value of the policy, and any future premiums paid by the donor earn a charitable tax receipt. Determining the fair market value requires us to obtain an actuarial valuation. Please contact us for further information.
In the case of a new policy, where the QEII Foundation 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.
There are many types of insurance products available. Some will emphasize future growth potential while others emphasize lowest insurance cost. Philanthropic policies should minimize risk and maximize certainty that the policy will sustain and deliver a known future gift.
The ultimate goal of charitable life insurance is to create a manageable, secure, enforceable gift for future needs.
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.
Consultation with QEII Foundation staff prior to establishing the policy is important so we are aware of the donor's wishes, and the donor is aware of the Foundation's requirements for accepting life insurance gifts.
Life insurance, rather than creating a future gift, can be used to replace wealth when your client arranges an immediate charitable gift. For example, parents 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. It is possible that the premium payment for the policy could be mostly or entirely offset by the tax credit from the original cash donation.