Giving a life insurance policy is another way to maximize your contribution to the Canadian Rugby Foundation. It enables you to make a significant, lasting gift to rugby in Canada with minimal spending of current savings or income. A gift of life insurance is a type of deferred gift. This means the proceeds from a gift commitment made now will be realized by rugby in Canada sometime in the future. Donors often struggle between their desires to achieve philanthropic goals and their need to maintain their estates for their families. Giving a gift of life insurance can eliminate this conflict.
Advantages of Life Insurance
Giving a gift of life insurance allows you to make a larger donation to the Canadian Rugby Foundation than you would have thought you could afford. It has a relatively low cost and does not reduce the value of your estate for your heirs. Life insurance proceeds are paid directly to the Canadian Rugby Foundation and are not subject to probate and other estate fees. In addition, these policies can provide an annual tax credit or a tax credit in the year of death.
How you would like to structure your gift will depend on where you have the greatest need for tax relief. For example:
- You can opt to retain ownership of the life insurance policy and therefore the flexibility to change the beneficiary over time as your circumstances may require. If you choose this option, your estate will then receive the tax credit when the gift is realized.
- When the Canadian Rugby Foundation is both the owner and the beneficiary of a policy, the donor receives immediate tax savings through the deductibility of the premiums. In these instances, the gift is “irrevocable”, meaning it cannot be changed.
When naming the Canadian Rugby Foundation as the “irrevocable” owner and beneficiary, you will receive an income tax receipt yearly for the full amount of the premiums paid. With increasing longevity, older persons can now purchase insurance at more affordable rates than have been possible in the past. Retired individuals who have some annual flexible income can support the Canadian Rugby Foundation without depleting their financial reserves or reducing the projected inheritances for family members. Further, greater leverage is possible when two donors, usually wife and husband, purchase a joint policy. These policies are available even when one spouse is not insurable. These are generally more economical than a policy only on the insurable spouse.
- Donating an existing policy.
By donating an existing policy that you no longer require, and name the Canadian Rugby Foundation as the “irrevocable” owner and beneficiary, you will receive a tax receipt for the net cash surrender value (less any outstanding policy loans) and any subsequent premiums paid. This policy can be sort of a hidden asset which is available to be used now for your philanthropic purposes.
Making the Canadian Rugby Foundation the beneficiary of a new or existing policy.
As was amended in the 2000 Federal Budget, a charitable donation tax credit will be available when a donor designates that the death benefit proceeds of his/her policy are paid directly to a charity. Therefore the estate will then receive a tax credit for the proceeds of the policy which can be applied to up to 100% of your net income for the year of death and the year prior. This tax credit is received when the gift is realized.
- Donating your life insurance policies from your employer or former employer to the Canadian Rugby Foundation.
You will not be able to change the ownership of this policy so you would make the Canadian Rugby Foundation the beneficiary of it. Similar to that described above, a donations tax credit will then be available when the death benefit proceeds from this policy are paid to the Canadian Rugby Foundation.
Life insurance proceeds are not subject to probate and they don’t reduce the value of other assets of an estate. The policy beneficiary designation is irrevocable so the donor’s intent is assured. This allows donors to make an extraordinary gift the Canadian Rugby Foundation at an extremely manageable cost.