Edward Jones Weekly Update – Aug 17

Three Ways to Use Life Insurance for Charitable Giving

Many people are motivated to give to charities whose work is important to them.

 

Using life insurance solutions for charitable giving can be an effective strategy that can help you support registered charities of your choice.

 

There are various ways to use life insurance to donate to charity. Once a donation amount, percentage or range has been determined, the next step should consider how the gift can be structured to help achieve the objectives. Objectives often include consideration of the tax relief available by gifting now, gifting upon death or a combination of both.

 

Examples of how life insurance policies can be used for charitable giving include, but are not limited to, the following.

  1. Donating the policy to a charity during the lifetime. Ownership of the policy may be transferred to the registered charity, who must be the irrevocable beneficiary, while the donor is generally bound to pay all premiums due according to the policy terms. Each year the charity would issue a donation receipt for the total amount of premiums paid resulting in a continuing tax credit that may be used by the donor while living. Implementing this strategy, however, means that the estate will not receive a donation tax credit upon the insured's death.
  2. Gifting all or some insurance proceeds by will. When proceeds are donated by will, the donor does not receive a tax credit for the premiums paid while living. The charity instead will issue a tax receipt upon the insured's death equivalent to the amount of the donation made.
  3. Naming a charity as a beneficiary of the life insurance. The form and timing of this strategy's tax credit is similar to one received when making a donation by will. The difference is that a beneficiary designation allows the donor the flexibility to easily change the beneficiary designation should circumstances change. The charity receives its gift in a way that provides a clear line between the charitable gift and gifts for estate beneficiaries, which may minimize the opportunity for conflict.

These strategies help provide the opportunity for personalizing the timing of charitable receipts. Each strategy has different tax consequences. Donors should consult with their tax professional to determine the structure that best suits personal objectives.

Make sure you have a detailed discussion with your financial advisor about the different options that are available to assist you in making an informed decision. Together, with your accountant and lawyer, you can work toward implementing insurance solutions as part of your overall financial strategy.

*Edward Jones does not provide tax or legal advice. Review your specific situation with your tax advisor and/or legal professional for information regarding, or issues concerning, the tax implications of making a particular investment or taking any other action.
** Insurance and annuities are offered by Edward Jones Insurance Agency (except in Quebec). In Quebec, insurance and annuities are offered by Edward Jones Insurance Agency (Quebec) Inc.

Ryan McLellan, Financial Advisor
Edward Jones Barrhaven
(613) 823-3404
ryan.mclellan@edwardjones.com