Merry Christmas to All CharitiesDonation Through Life Insurance!

Merry Christmas to All CharitiesDonation Through Life Insurance!


Alain E. Roch, MBA

President and CEO

Merry Christmas to All Charities: Donation Through Life Insurance!

In the mid-1990s, a series of tax measures, including the elimination of taxes on capital gains generated by shares of publicly owned companies given free of charge, reshaped the climate of charitable donations. In 2010, 24 million Canadian taxpayers, which is 84% of the population older than 15, gave money to a charity or non-profit organization, for a total of $10.6 million. According to Statistics Canada, each donor gave $446 on average. Donors are more likely to be older people, have a higher income, be educated, or attend weekly religious activities.

A planned gift can take several forms, but giving life insurance involves significant tax and financial benefits. It’s also an affordable way to make a large donation.

Giving a life insurance policy comes with a number of benefits for the donor: you can take out a life insurance contract and transfer it to a certified charity by naming it as the beneficiary. You will then receive nearly half of the annual premium as part of your tax refund. This process in no way affects the acquired wealth you wish to bequeath to your loved ones.

Furthermore, you can also transfer existing life insurance contracts. In that case, you will receive a tax deduction for every premium paid as of the time the donation is made or for the cash value.

Tax and estate planning

Baby boomers will transfer billions of dollars to their children in the next two decades. This money will then be used in one of four ways: for taxes, succession, investments or charitable contributions. For baby boomers who are well off, we are expecting donations to play a significant role in estate transfers.

In the context of estate planning, the desire to leave a legacy and values while saving taxes is usually the reason behind charitable contributions. However, according to Imagine Canada, an organization that raises awareness about philanthropy, tax credits are fifth on the list of reasons behind a charitable contribution, after compassion for the cause, having personally been affected by it and the obligation to conform with it for faith and religious reasons.

However, in the case of a succession, tax authorities are first to receive the deceased person’s wealth, followed by family, friends and, if there are funds left, charities, which come in last. Yet, if each of us looked at our estimated income tax statement at the time of our deaths, many would be shocked. There are ways, however, to significantly reduce our tax bill. Charitable contributions are the fastest way to do it. Taking out a life insurance policy that names an organization as the beneficiary allows you to transform a donation into a tool to reduce succession fees and ensure funding for a cause.

Just like a succession, the sale of a company generates a substantial tax burden. It’s an opportunity to make a contribution that counts in every way.

Even though philanthropy is not at the top of our list of priorities when selling a business, investors or entrepreneurs know that a large part of their gains will be deflated, but they can choose where that loss goes: in taxes or to charity. By choosing the second option and planning a charitable contribution, you could significantly reduce the tax fees associated with the transaction.

Finally, regardless of your reasons, planned gifts have a real, sustainable impact. They allow charities to receive the long-term funding they need to offer the necessary services for the maintenance and development of their communities’ quality of life.

No matter the amount, your planned gift is important for the organization that receives it. Planned giving counts.