Did you know that contributing to your favourite charity not only helps their bottom line, but that your generosity can also save you money on your taxes?

Ever since the early 90’s when cost-cutting became the top priority, government support for charities has decreased significantly. In the absence of their traditional source of funding, charities are increasingly reliant on the generosity of individuals to fund their activities.

To reward and encourage the philanthropists among us, the government offers tax credits to those who donate to charity. One of the best ways to take advantage of these tax credits is to use life insurance to fund the charity of your choice.

There are two ways to structure a life insurance policy when used as a charitable gift:

You, or you and your spouse are the life insured(s), naming the charity as owner and beneficiary. Using this structure, the charity issues charitable donation receipts for the premiums you pay into the policy. This allows you to claim tax credits during your lifetime. The proceeds of the life insurance policy are paid directly to the charity upon your death, with no tax implications.

You retain ownership of the policy, and name the charity as the beneficiary. This allows you to maintain control of the policy, and gives you the option to change the beneficiary should your circumstances change. Under this structure, the donation receipt is issued when the charity receives the proceeds of the insurance upon your death. The receipt is issued in your name and can be used to offset other tax liabilities incurred by your estate.

If you are currently donating to a favourite charity, have left a generous charitable bequest in your Will, or have assets that will incur substantial taxes to your estate (i.e. a large RRSP/RRIF balance, assets with large unrealized capital gains etc…), then you (and your chosen charity) can benefit considerably from a charitable gifting program.

Using Universal Life insurance to fund a charitable bequest is a great way to ensure that your assets go to your favourite charity rather than to Ottawa.

To discuss whether setting up a charitable gifting program is right for your situation, or to explore other ways you can use Universal Life Insurance to lower your tax bill, give me a call at 506-443-RRSP or send me an e-mail. I’d be happy to discuss it with you.

Darrel Spencer can be reached at 506-443-RRSP, or via his profile at this link