Life insurance can be an effective way to help your favourite charity achieve their long-term goals.
Along with tax savings, the benefit of donating a life insurance policy includes the freedom to choose what type of policy and how much premium you pay. Your gift can’t be legally challenged because life insurance is considered separate from your other estate assets.When you buy a policy that is affordable, you will be much more likely to be able to hold onto it if you have to make any serious cuts to your budget. Always be sure to speak to a knowledgeable independent agent who can ‘shop’ various companies to find the best rates for your particular situation. When you buy a policy that is affordable, you will be much more likely to be able to hold onto it if you have to make any serious cuts to your budget. But the term insurance policy is simple.
Donating a life insurance policy isn’t subject to taxes, probate costs or estate debts, and you can make a substantial contribution through relatively small monthly or yearly payments. At the same time, you’ll be rewarded for your donation through the charitable tax receipts you receive. The premiums on a $25,000 policy will cost far less than the pay-out amount over time, and when you include your tax credits, you end up paying even less overall for a very sizeable gift.
Here are three ways you can donate a life insurance policy to a charity:
1. Take out a new policy in the name of the charitable organization. You’ll receive a charitable tax receipt for the cash value of the policy and for any premiums you pay.
2. Name the charity as the beneficiary of an existing policy. This is a good option if you already have a policy that your family no longer needs for financial stability. At the time of your death, the charity will receive the policy proceeds and your estate will receive the tax benefits.
3. Transfer ownership of an existing policy to the charity and receive a charitable tax receipt for the cash value of the policy. If you owe annual premiums on the policy, you’ll still pay them, but you’ll also receive tax receipts in the amount of your payments.
Leaving long-term charitable gifts in your will
Whatever your age, having an updated will is an important part of estate planning, especially if you want to include long-term charitable gifts.
It doesn’t take much to leave a lasting legacy; if every adult in Canada left $100 in their will, charities could count on receiving millions in donations every year. Whether you choose to give to a large national organization or a local group, donating a life insurance policy can have a great impact on the people or issue your charity supports.
However you choose to distribute your assets, make sure your will clearly spells out your wishes. A will saves your loved ones from struggling through estate complications. Your local Financial Advisor is ready to help with advice on estate and gift planning. Contact them today..If you are looking into term life insurance, beware of policies that do not allow you to “convert” your term policy into a permanent one, this feature typically allows you for exchanging your term policy for a permanent plan such as universal life or whole life without proving you’re still healthy. For example, if you buy a 20-year term life insurance policy, and decide after 19 years that you still need coverage but have developed some medical conditions since your initial term purchase, the conversion feature would allow you to keep your coverage, whereas you may not be able to qualify if you were to go back out to the market for a new policy and most term policies include a conversion feature, but not all, so be sure to find out.There are many newer policies that gives you the option to receive payments if you get a chronic illness or need to be placed in a care facility and several companies may give you 20- or 25-year windows at which you can get back some or all of your premium paid into the policy if you no longer want or need the coverage, if you want the option to get cash out of your life insurance policy if you get cancer or need end-of-life care, then looking for a company that offers this option is a smart move.