Do you have clients who are charitable? There is a way for them to make the same donation they already commit more effective by using life insurance.
There are two ways that this works. The first way is to donate a policy to the charity today. This is done by changing ownership to the charity or designate ownership of a new policy to the charity of their choice. The result is annual premiums become deductible in the same manner as their regular donation. For example, if a client donates $5,000 annually to a charity, they purchase a $5,000 annual premium policy and designate the charity as owner. The policy is owned by the charity and paid for by the client. This will provide the charity with an asset it could collateralize if necessary, and provide a large lump-sum when the death benefit is paid.
A second way to make a donation stretch further is to designate a charity as beneficiary of a policy’s death benefit. This doesn’t provide an annual tax credit like donating the policy today. However, this suits a client who is anticipating a large terminal tax return. The CRA currently allows for 100% of a taxpayer’s net income to be donated in the year of death and the preceding tax year. So, if someone is anticipating $200,000 of taxable income as a result of dispositions from assets like RRSP’s, a $200,000 benefit earmarked for charity can wipe out taxes owing in that year and generate a tax credit.
This is a great piece from Equitable Life that you can share with your clients. Please reach out to your Business Development Specialist at QFS for more information!
Ken Poniatowski, CFP®
Business Development Specialist
Qualified Financial Services