Increasingly popular, planned giving enables you to use your life insurance to make charitable donations.

It is a way to lend support to a charity that is important to you and give a substantial amount of money. In short, you can bequeath the proceeds of your life insurance policy to a charitable organization and benefit from significant tax advantages.

Anybody can take out life insurance for the purpose of signing the rights over to a charity. Also, all forms of life insurance lend themselves to this form of donation.

Tax credit

If the proceeds on the donator's life insurance policy are bequeathed to a charity in his will, the full amount of the donation will be tax-deductible on the income tax returns for the year the person dies and will therefore result in a tax credit for that year only.

There is also an even better way to make a donation. Simply sign away your policy to the charity of your choice. In this case, each premium you pay will be considered as a donation and therefore generate a tax credit.

What are the advantages of a planned donation?

When you make a planned donation, not only do you benefit from tax savings while you are still alive, but your heirs will also benefit. The tax advantages of these forms of donations are therefore quite interesting:
 

• A federal tax credit of 15% is given on the first $200 and 29% on the remaining donation amount.  
• Depending on your home province, you can benefit from an additional tax credit. Contact your provincial tax office or your financial planner for more information.  
• In a single year, a Canadian can obtain federal tax credits up to 75% of his/her net income.  
• Also, for the year of his/her death and the year prior, a donator can obtain tax credits for charitable donations of up to 100% of his net income.
   

An example of savings
Peter has a $ 25,000 life insurance policy. He decides to sign the rights over to a charity of his choice. The annual premium is $483. With the tax savings, Peter's premium could be reduced to $220 a year, depending on your home province. Upon his death, the charity will collect the $25,000.

What organizations are eligible?

Most charitable organizations are eligible for this type of donation provided that they are recognized by the Canada Customs and Revenue Agency and their province's taxation department. Also, they must have staff and resources to develop and administer planned giving programs, which is becoming an increasingly common practice.

Different ways to make a planned donation

Since there are different ways to make a planned donation, you have to decide what donation is best for your situation (the needs of your loved ones, your age, income, etc.) You can also ask one of our financial security advisors to help you make your choice.

Interesting links

To learn more about planned giving, visit the Canadian Association of Gift Planners Website and the Leaving a Legacy Website (for Quebec only).