11 IN PARTNERSHIP WITH: TO CHARITABLE ORGANIZATIONS PLANNED GIVING through life insurance WELCOME.

11

IN PARTNERSHIP WITH:

TO CHARITABLE ORGANIZATIONS

PLANNED GIVING

through life insurance

WELCOME

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Specific objectives:

1. To support a favourite charity

2. To receive a tax credit

Planned giving through life insurance

Two ways for people to give through life insurance:

1.During their lifetime2.Upon their death

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Planned giving refers to a donation you agree to make now through a bequest that will be carried out later.

Advantage

• Allows the donor to make a significant donation by way of a modest annual contribution.

Method

• Life insurance

Concept


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Advantages for the donor

• Significant donation following their death

• Optimization of donor tax credits

• Estate (family property) is not affected

• Various options available based on donor's financial situation

• Donation paid directly to the charity(no administration or estate settlement costs, and protected from creditors and/or any legal claims)


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• Ensures long-term funding

• Guarantees the payment of significant amounts upon the donor's death

• Enables prompt payment of bequeathed amounts when the charity is named the beneficiary of the insurance contract

• Ensures a bequest that can't be contested

Advantages for the charity


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• The donor takes out an insurance policy and bequeaths it to the charity

How?

Types of life insurance

• Permanent• Term

Two ways to give through life insurance:

• Beneficiary designation• Policy assignment


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Two ways for people to give

1. Upon their death

Beneficiary designation

Death benefit

2. During their lifetime

Policy assignment

Annual premium

Annually Upon their death

Amount of donation

Tax credit


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1. Beneficiary designation in the will:• The policy is kept by the donor for his or her lifetime

• The donation is specified in the will

• The amount of the donation goes into the estate

• The donor will receive the tax credit upon his or her death

Two ways to donate a life insurance policy:

EstateEstate

CharityCharity

DonorDonor

• Owner

InsurerInsurer Death benefit


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1. Beneficiary designation in the policy:• The policy is kept by the donor for his or her lifetime

• The charity is designated in the policy

• The sum insured does not go into the estate

• The donor will receive the tax credit upon his or her death


EstateEstate

CharityCharity

DonorDonor

• Owner

• Beneficiary

Death benefitInsurerInsurer


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Life insurance (donation upon death)

• Amount of donation = death benefit

• Maximum tax credit of 100% of the net income for the year of the donor's death

• Any excess amount can be carried back to the previous year, up to 100% of the net income


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Life insurance (donation upon death)

Advantages:

• The donor retains control of the policy

• Upon death, the amount is paid directly to the charity

• Receipt issued for 100% of the value of the contract

• Ability to carry back if income is insufficient

Disadvantages:

• No tax break during the donor's lifetime

• Credit could be lost if income is insufficient (death at the beginning of the year)


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2. Policy assignment (donation of a new policy):

• The donor gets a charitable donation receipt equivalent to the annual premium

• Possibility for quick payment

• Paid-up insurance


EstateEstate

CharityCharity

DonorDonor • Owner

Death benefit

InsurerInsurer


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Advantages:

• Offers a way to make a substantial donation

• Is no longer part of the donor's estate

• Receipt issued during the donor's lifetime

Disadvantages:

• Transfer is irrevocable

• Long-term commitment: however, there are quick payment solutions

• Policy lapses if payments stop being made


2. Policy assignment (donation of a new policy)


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2. Policy assignment (donation of an existing policy)

• The donor gets a charitable donation receipt equivalent to the policy's cash surrender value

• For subsequent years, the donor gets a charitable donation receipt equivalent to the annual premium paid.


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Charitable donations

Federal tax credit 12.53% 24.22%

First$200

Over andabove $200

Provincial tax credit in Quebec 20% 24%

Combined 32.53% 48.22%


* These calculations include the provincial abatement

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Charitable donations

Donation:$600

Tax savings: $258

Net cost of donation:

$342


Quebec

Amount of donation: $600

Federal Tax Credit $

First $200 12.53% $25.05

Over $200 24.22% $96.86

Federal total: $121.91

Provincial

First $200 20% $40

Over $200 24% $96

Provincial total: $136

Combined total credit: $257.91

Combined tax credit percentage: 42.99%

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Assumptions: 50-year-old woman - Life expectancy: age 83

$100,000 insurance - $5,000 premium payable in 7 years


Insured(s)

Death benefit: Sum insured + Fund

Portion of accumulation fund payable automatically upon the death of each insured: 100%

Coverage Minimum Annual

Insured 1: Genesis 5, Level cost $100,000.00 for life $1,339.92 for 50 years

Jane Client

Female, age 50, NS (non smoker) Total minimum annual premium for insured: $1,339.92

Premium Details

Premiums at issue: Minumum annual premium $1,339.92

Maximum first-year premium for waiver of premiums $4,837.84

Premium frequency: Annual

Premiums paid: As selected for 7 years $5,000.00

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Year Age Annual premium

Donation if donor dies during the year

Tax credit during donor's lifetime

Tax credit if donor dies during the year

3 53 $5,000 $113,794 $0 $54,834

5 55 $5,000 $120,335 $0 $57,988

10 60 $0 $129,473 $0 $62,394

15 65 $0 $128,968 $0 $62,151

20 70 $0 $128,348 $0 $61,852

Option 1Beneficiary designation


2020




Net cost of donation

Tax credit upon donor's death

3 53 $5,000 $113,794 $2,379 $2,621 $0

5 55 $5,000 $120,335 $2,379 $2,621 $0

10 60 $0 $129,473 $0 $0 $0

15 65 $0 $128,968 $0 $0 $0

20 70 $0 $128,348 $0 $0 $0

Option 2Policy assignment

$16,653


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Tax credit if donor dies during the year

Annual donation amount


Net cost of donation

Tax credit upon donor's death

3 53 $5,000 $113,794 $0 $54,834 $5,000 $2,379 $2,621 $0

5 55 $5,000 $120,335 $0 $57,988 $5,000 $2,379 $2,621 $0

10 60 $0 $129,473 $0 $62,394 $0 $0 $0 $0

15 65 $0 $128,968 $0 $62,151 $0 $0 $0 $0

20 70 $0 $128,348 $0 $61,852 $0 $0 $0 $0

Option 1Beneficiary designation

Option 2Policy assignment

When does the donor want to receive the tax credits?

$16,653


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When does the donor want to receive the tax credits?

Upon his/her death(Beneficiary designation)

During his/her lifetime(Policy assignment)

Tax credit that increases the net value of the estate

Annual tax credit

Reduces the estate tax on realized gains upon death

Choose a quick payment option

The policyholder retains control of policy

The policyholder no longer controls the policy


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Type of donation Owner Beneficiary

In the will Donor Estate

Beneficiary designation Donor Charity

Policy assignment (Donation of a new policy)

Charity Charity

Policy assignment (Donation of an existing policy)

Charity Charity


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Type of donation

Tax advantage

Amount of donation

Eligible maximum

Amount to carry back

In the will Upon death Sum insured

100% of the net income for the year of death

Remainder up to 100% of the net income for the year prior to death

Beneficiary designation

Upon death Sum insured

Policy assignment (Donation of a new policy)

During the donor's lifetime

Annual premium

75% of the net income for the year of the donation

Remainder up to 75% of the net income for the next 5 years

Policy assignment (Donation of an existing policy)

During the donor's lifetime

Cash surrender value (year of assignment)

and annual premium (subsequent years)

Summary of tax benefits


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Conclusion

There are many ways to give,

but it's important to know how to give wisely...

Talk to the professionals.


11 IN PARTNERSHIP WITH: TO CHARITABLE ORGANIZATIONS PLANNED GIVING through life insurance WELCOME.

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Transcript of 11 IN PARTNERSHIP WITH: TO CHARITABLE ORGANIZATIONS PLANNED GIVING through life insurance WELCOME.