Give more, pay less!
Using life insurance for charitable donation
Be on the lookout…
Do you have clients that:
• Don’t have debts or financial dependants; or
• Regularly make charitable cash donations; or
• Volunteer for one or more organisms; or
• Care deeply about a charitable cause; or
• Are older; or
• Have disposable income.
If one or more of these points are applicable, you
should think about discussing planned giving.
What is planned giving?
• It’s a process to help the donor make larger
charitable gifts while maximizing his benefits
and/or minimizing the impact on his estate.
• Charitable gifts can be made during the
lifetime of the donor or upon death as part of
the estate plan.
Canadians are generous!
• In 2010, 84% of Canadians over age 15 made a
financial donation (same as in 2007).
• Total of $10.6 billion donated in 2010.
• Donors who planned their donations in advance and
supported the same organizations repeatedly over
time give significantly more than those who do not.
Source: “Caring Canadians, Involved Canadians: Tables Report 2010”, Statistics Canada
Where does the money go?
Organizations
Money
Donors
Religious
46%
36%
Health
15%
56%
Social Services
9%
39%
International
6%
9%
Hospitals
6%
18%
Source: “Caring Canadians, Involved Canadians: Highlights from the 2007 Canada Survey of Giving, Volunteering and Participating”, Statistics
Canada
It Pays to Give!
Federal Tax Credits
Every province and territory except Québec
• First $200 donation:
15.00%
• Donations above $200:
29.00%
Québec*
• First $200 donation:
• Donations above $200:
12.53%
24.22%
* The tax value of the federal credit is the sum of the federal credit less the 16.5%
abatement for Québec taxpayers.
Provincial and Territorial Tax Credits
Federal Credit
Provincial / Territorial Credit
Up to $200
Over $200
Up to $200
Over $200
Alberta
15.00%
29.00%
11.00%
21.00%
British Columbia
15.00%
29.00%
5.06%
14.70%
Manitoba
15.00%
29.00%
10.80%
17.40%
New Brunswick
15.00%
29.00%
9.68%
17.95%
Newfounland and Labrador
15.00%
29.00%
7.70%
13.30%
Northwest Territories
15.00%
29.00%
5.90%
14.05%
Nova Scotia
15.00%
29.00%
8.79%
21.00%
Nunavut
15.00%
29.00%
4.00%
11.50%
Ontario
15.00%
29.00%
5.05%
11.16%
Prince Edward Island
15.00%
29.00%
9.80%
16.70%
Québec
12.53%
24.22%
20.00%
24.00%
Saskatchewan
15.00%
29.00%
11.00%
15.00%
Yukon
15.00%
29.00%
6.40%
12.80%
http://www.cra-arc.gc.ca/chrts-gvng/dnrs/svngs/clmng1b3-eng.html
How much can you claim?
• Donations can be claimed for tax credits in the year
they were made or any of the following five years.
• The maximum amount of donations that can be
claimed in a year is 75% of the donor’s net income.
• The maximum amount of donations that can be
claimed in the year of death or the year before is
100% of the donor’s net income.
How can you help your client?
• Life insurance is a great tool for planned giving.
• A donor gets to give much more than what he or she
pays out-of-pocket.
• Possibility to structure the life insurance policy so
that the tax credit is based on the benefit paid upon
donor’s passing or on the premiums paid during the
lifetime of the donor.
Give more, pay less!
Example
• MNS 50 years-old
• Wants to contribute to his favourite charitable
organization.
• Chooses to give through a life insurance – ParPlus 20pay (enhanced option guaranteed to age 100) with a $50,000
face amount.
• Annual premium: $1,300
Give more, pay less!
ParPlus 20-pay
Cumulative Premium
$26,000
Charitable Donation:
$50,000
And that’s before considering the tax credit associated with the donation!
When do you want the tax credit?
Option 1
• Following death, on the final income tax return.
– Benefits the estate who is responsible of paying the
income tax on the final return.
Option 2
• Every year when a premium is paid.
– Benefits the taxpayer during his or her lifetime.
What can be claimed for tax credit?
Option 1
• Donor owns the policy, charitable organization is the
beneficiary.
• The life insurance benefit paid to the charity upon
the donor’s death can be claimed for a tax credit on
the donor’s final income tax return.
• This strategy helps offset a potential large tax bill
upon death following the deemed disposition of the
deceased’s assets.
Provincial and Territorial Tax Credits
Option 1: Tax Credit on $50,000 Donation
Federal Credit
Provincial / Territorial Credit
$50,000 Donation
Up to $200
Over $200
Up to $200
Over $200
Alberta
15.00%
29.00%
11.00%
21.00%
$
24,952.00
British Columbia
15.00%
29.00%
5.06%
14.70%
$
21,803.80
Manitoba
15.00%
29.00%
10.80%
17.40%
$
23,158.80
New Brunswick
15.00%
29.00%
9.68%
17.95%
$
23,430.46
Newfounland and Labrador
15.00%
29.00%
7.70%
13.30%
$
21,608.80
Northwest Territories
15.00%
29.00%
5.90%
14.05%
$
21,480.70
Nova Scotia
15.00%
29.00%
8.79%
21.00%
$
24,947.58
Nunavut
15.00%
29.00%
4.00%
11.50%
$
20,207.00
Ontario
15.00%
29.00%
5.05%
11.16%
$
20,039.78
Prince Edward Island
15.00%
29.00%
9.80%
16.70%
$
22,808.20
Québec
12.53%
24.22%
20.00%
24.00%
$
24,078.62
Saskatchewan
15.00%
29.00%
11.00%
15.00%
$
21,964.00
Yukon
15.00%
29.00%
6.40%
12.80%
$
20,859.20
The maximum amount of donations that can be claimed in the year of death is 100% of net income.
Tax Credit
Be careful…
Option 1: $50,000 Donation
• If the amount donated is higher than the
deceased taxpayer’s net income for the year
of death, the excess donation can be carried
back and claimed in the previous year’s
income tax return up to 100% of that year’s
net income.
What can be claimed for tax credit?
Option 2
• Charitable organization is the owner and the beneficiary.
• Donor pays the premiums.
• Donor receives annual tax receipt for premiums paid in
the year.
• Donor can claim a tax credit for premiums paid.
• No tax credit for death benefit paid to charitable
organization.
Provincial and Territorial Tax Credits
Option 2: Annual Premium $1,300
Annual premium of $1,029
Annual Tax Credit
Net Annual Cost
Total Net Cost (20 years)
Alberta
$
602.00
$
698.00
$
13,960.00
British Columbia
$
520.82
$
779.18
$
15,583.60
Manitoba
$
562.00
$
738.00
$
14,760.00
New Brunswick
$
565.81
$
734.19
$
14,683.80
Newfounland and Labrador
$
521.70
$
778.30
$
15,566.00
Northwest Territories
$
515.35
$
784.65
$
15,693.00
Nova Scotia
$
597.58
$
702.42
$
14,048.40
Nunavut
$
483.50
$
816.50
$
16,330.00
Ontario
$
481.86
$
818.14
$
16,362.80
Prince Edward Island
$
552.30
$
747.70
$
14,954.00
Québec
$
595.48
$
704.52
$
14,090.40
Saskatchewan
$
536.00
$
764.00
$
15,280.00
Yukon
$
502.60
$
797.40
$
15,948.00
Give more, pay less!
ParPlus 20-pay
Highest Net Cost: $16,330
Lowest Net Cost: $14,000
Charitable Donation:
$50,000
Possible Strategy for Tax Credits
• Instead of claiming your charitable donations
annually, consider claiming all donations made over
the last 5 years to maximize your tax credit for
amounts over $200.
• To maximise the charitable tax credit, a taxpayer can
claim receipts made out in either his name and his
spouse’s name.
Transfer of an Existing Policy
• It is possible for a donor to transfer ownership of an
existing life insurance policy.
• Charitable organization becomes the new owner and
beneficiary; donor continues to pay premiums.
• Charitable donation receipt in the amount of the cash
surrender value at time of transfer will be given to donor.
• Premiums paid by donor following the transfer will also
be considered as a charitable donation.
• If there’s a policy gain resulting from the policy
ownership transfer, that amount is taxable to the
transferor.
Life Insurance Products
• Any permanent life insurance product can be used as
a charitable gift:
• For couples, the joint last-to-die option, when
available, will cost less.
Go to Assumption Life’s Producer’s Corner for
more information on our product line-up!
producerscorner.ca
or
www.assumption.ca
Benefits for Charitable Organization
• Additional revenue to pursue their work or
specific projects.
• Facilitates long term planning.
• Larger sums than just cash donations.
Benefits for Donor
• Substantial contribution for relatively low cost.
• Significant tax credits.
• With a new life insurance policy, no impact on estate.
• Donation is incontestable.
• Donor is free to choose the charitable organization.
• Part of their legacy.
Ask Your Clients
• When you discuss estate planning with your clients,
ask them about the charities that are important to
them.
• Offer your help with planned giving.
• Show them how life insurance gives them the
opportunity to give more without changing their
budget.
Give more, pay less!
Using life insurance for charitable donation