Life Insurance Bequest
From a young age we feel the responsibility of protecting our family income under any circumstance, especially the passing of a wage earner. We spend years paying premiums for our life insurance coverage because at the time we submitted to the underwriting process there was an obvious need for this coverage.
However, as life happens the original need for this coverage may disappear. Is this type of coverage still appropriate for you? You may want to ask yourself whether there still a place for life insurance coverage on your life? Will it be paid to your estate?If so, it will be included in the total estate value and therefore subject to probate fees and distribution according to instructions in your Will.
If you name a direct beneficiary no creditor or other body can access those funds upon death of the insured. Many people own life insurance to cover eventual taxation on their registered assets or capital gains taxes on investments or other holdings.
Is your Estate value sufficient to cover this tax bill or do you have planned gifts in place to reduce or eliminate this taxation?
You may be able to use your policy to reduce taxes against your estate while making a significant gift to charity such as Help Lesotho, the beneficiary.
In Canada, life insurance policies pay out tax free to beneficiaries. Properly structured, most policies also enable tax-sheltered accumulation of investment income and gains. These two features, plus the fact that life insurance is a leveraged investment, make life insurance an excellent financial and estate planning tool.
Next to bequests, life insurance is the most popular type of estate gift. A gift of life insurance will enable you to make a significant future gift for a modest cost.
Your gift of life insurance can be current or deferred:
A current gift of life insurance:
- Transfer ownership of your paid-up policy to Help Lesotho and receive a charitable donation receipt for its cash value;
- Transfer ownership of an existing policy with premiums still owing, and in return, you will receive a tax receipt for the cash value of the policy AND for subsequent premium payments; or
- Purchase a new policy; assign Help Lesotho as owner and beneficiary, and you will receive an annual tax receipt for all payments on the premiums.
A deferred gift of life insurance:
- Retain ownership of the policy and name Help Lesotho as the direct beneficiary. When you pass away, Help Lesotho would receive the death benefit and your estate will receive a receipt for the amount transferred. This provides you with maximum flexibility, although you do not receive a receipt for premiums paid.
There are four key financial advantages to you or your estate when you choose to designate your policy to Help Lesotho:
- Cost-Effective: Enables you to make a substantial gift to charity at little or no cost, without touching other assets;
- Timely: Avoids the costs and delays in the probate process and estate administration process;
- Privacy: Charitable gifts with life insurance can remain private. By contrast, wills go through probate and therefore a charitable bequest included in the will is part of public record; and
- Tax Relief: Tax savings in your lifetime or tax savings for your estate.
- Tax Savings in Your Lifetime: When you designate Help Lesotho as the owner and beneficiary of the insurance policy, you receive an annual tax receipt for the insurance premiums you pay.
- Tax Saving for Your Estate: When you remain the owner of your life insurance policy and designate Help Lesotho as the beneficiary, your estate will receive a charitable tax receipt to significantly reduce your taxes on your final tax return, and in some cases the previous tax return. Because of the money saved on taxes, more of your assets such as real estate, tangible personal property or a family business can be left to your loved-ones thanks to the tax credit your estate will receive.
Information you will need:
- Legal name: Help Lesotho
- Charitable registration number: 82246 8476 RR0001
- Address: 610 Bronson Avenue, Ottawa, ON K1S 4E6
For more information please contact Kate Lambert, Director at 613-369-5868 or firstname.lastname@example.org.
*Disclaimer: this information is for reference purposes only and does not constitute nor substitute legal, accounting, or other professional advice. Please consult with your professional advisor, family and/or legal team to make decisions that suit your circumstances and charitable goals.