Legacy Enhancer

Donating Life Insurance to Charities is the least expensive and most tax-effective way to create transformational gifts for the causes you care about. Did you know Life Insurance can be owned by private charitable foundations and Donor Advised Funds (DAFs)?

Case Study

A family wanted to make a generous transformational gift that would help their favourite charity, provide substantial ongoing cash flow and inspire others to follow their lead. This was structured as a $2 million gift of Permanent Cash Value Life Insurance. The annual premium of $55,000 for 10 years is considered a charitable donation. Their net cost after the charitable donation tax deduction is $27,500 annually or $275,000 over 10 years. Starting at Year 11, the charity will receive annual tax-free cash dividends of $21,500 every year for the rest of the donor’s lifetime.

Net result*: the charity will receive $645,000 in tax-free cash dividends during their lifetime and a death benefit of $1.5 million, a total gift of over $2 Million.

Net cost to the donors was 13 cents for each dollar donated! The cost of giving could have reduced even more if the donors used appreciated securities to fund the gift.

*based on life expectancy of age 90 of last surviving spouse

Other Considerations

• They were recognized for their generosity during their lifetime.

• Their taxes were reduced by approximately $27,500 every year for 10 years.

• The charity enjoys important and ongoing cash flow from the gift.

• They demonstrated the importance of planned giving by setting an example for

their family, friends and fellow philanthropists.

• Unique treatment under Canada’s Income Tax Act.