Strategic Planned Giving

Planned Giving: A strategy to maximize your support of your favourite charity


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Planned giving using life insurance is for individuals who feel compassion and want to give to a cause in which they personally believe, and want to maximize the impact of their giving, while offsetting current and future tax obligations.

Planned giving using life insurance can help you to:

  • Support your favourite charitable organization in a more significant way than you may have been able to before
  • Protect the value of your estate by avoiding erosion due to taxes, probate and administration fees


Charitible Giving Article infographic version 2

Why planned giving?

Planned giving using life insurance allows you to decide how your estate will be distributed. Life insurance can be used to:

  • Make gifts to your favourite charity
  • Leave an inheritance to your heirs
  • Pay taxes, so more of your estate is available for charities or your heirs


Consider this:

You may not use all your net worth in your lifetime, so it may ultimately be gifted to a charity.Winston Churchill quote

  • Does it make sense to pay income tax on the growth each year?
  • Permanent life insurance lets you accumulate cash value, within certain legislative limits, without paying tax on it until you withdraw it from the policy. Upon death, your named beneficiaries receive the death benefit tax-free.
  • During your lifetime, you can contribute up to 75 per cent of your net income to charity.
  • In the year of death and the preceding year, you can contribute up to 100 per cent of your net income to charity.


Now or later:

A couple, male age 47 and female age 45, want to donate $5,000 a year to their favourite charity.

Charitible Giving Article chart, version 2
They have some choices:

  • Cash donations–Take tax receipts for the donations as they are made.
  • Charity owns policy–Buy a life insurance policy, donate it to the charity, then take tax receipts as the premiums are paid.
  • Couple owns policy– Buy a life insurance policy, retain ownership, then at death take a tax receipt for the proceeds paid to the charity.

Which is best for you?


Compare the impact of your choices

Life insurance owned by the charity or the couple:

A couple, male age 47 and female age 45, both non-smokers, standard underwriting risks, buy a permanent joint-life insurance policy, with proceeds payable on the death of the last to die, with premiums of $5,000 annually for 20 credit infographic version 2


This example is based on average illustrated permanent life insurance death benefit values from four of Canada’s largest life insurance companies. Actual results vary with age, gender, health, return provided in the policy and other factors. For an explanation of the assumptions used in present value calculations, please refer to the important considerations section.


It depends:

  • Do you want to maximize the gift your charity receives?
  • Do you need the tax credit today?
  • Can you use the full deduction at death to offset taxes on your estate?
  • Do you want the flexibility to change which charity receives the donation?

Please consult your financial security advisor for a personalized example of how this concept may apply to you.


Important considerations

An exempt life insurance policy is defined in Regulation 306 of the Income Tax Act (ITA). The ITA provides that the savings element is exempt from annual accrual taxation, provided certain conditions are met.

Permanent life insurance values illustrated are based on these companies’ illustration software: London Life, Great-West Life, Manulife and Sun Life. Values illustrated were current as of July 17, 2007. Values illustrated in this example are not complete without cover pages, reduced examples and product feature pages from these companies having the same date. Further details on the assumptions used can be obtained upon request.

The total death benefit at the assumed date of death includes guaranteed and non-guaranteed values. Present values of cash donations and tax credits are based on an interest rate of three per cent, a tax rate of 45 per cent over a 20-year period and Ontario residency. The present value of the death benefit is based on an interest rate of three per cent and the younger insured’s life expectancy of age 85. Tax credits vary by province.

This material is for information purposes only and shouldn’t be construed as legal or tax advice. Every effort has been made to ensure its accuracy, but errors and omissions are possible. All comments related to taxation are general in nature and are based on current Canadian tax legislation for Canadian residents, which is subject to change. Persons who are not residents in Canada, or who are resident in Canada but are citizens of another country, may be subject to different tax rules in Canada and may also be subject to taxes levied by jurisdictions other than Canada. For individual circumstances, consult with legal or tax professionals.


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