11 IN PARTNERSHIP WITH: TO CHARITABLE ORGANIZATIONS PLANNED GIVING through life insurance WELCOME

22 Specific objectives: 1.To support a favourite charity 2.To receive a tax credit Planned giving through life insurance Two ways for people to give through life insurance: 1.During their lifetime 2.Upon their death

33 Planned giving refers to a donation you agree to make now through a bequest that will be carried out later. Advantage Allows the donor to make a significant donation by way of a modest annual contribution. Method Life insurance Concept Planned giving through life insurance

44 Advantages for the donor Significant donation following their death Optimization of donor tax credits Estate (family property) is not affected Various options available based on donor's financial situation Donation paid directly to the charity (no administration or estate settlement costs, and protected from creditors and/or any legal claims) Planned giving through life insurance

55 Ensures long-term funding Guarantees the payment of significant amounts upon the donor's death Enables prompt payment of bequeathed amounts when the charity is named the beneficiary of the insurance contract Ensures a bequest that can't be contested Advantages for the charity Planned giving through life insurance

66 The donor takes out an insurance policy and bequeaths it to the charity How? Types of life insurance Permanent Term Two ways to give through life insurance: Beneficiary designation Policy assignment Planned giving through life insurance

77 Two ways for people to give 1. Upon their death Beneficiary designation Death benefit 2. During their lifetime Policy assignment Annual premium Annually Upon their death Amount of donation Tax credit Planned giving through life insurance

88 1. Beneficiary designation in the will: The policy is kept by the donor for his or her lifetime The donation is specified in the will The amount of the donation goes into the estate The donor will receive the tax credit upon his or her death Two ways to donate a life insurance policy: Estate Charity Donor Owner Insurer Death benefit Planned giving through life insurance

99 1. Beneficiary designation in the policy: The policy is kept by the donor for his or her lifetime The charity is designated in the policy The sum insured does not go into the estate The donor will receive the tax credit upon his or her death Two ways to donate a life insurance policy: Estate Charity Donor Owner Beneficiary Death benefit Insurer Planned giving through life insurance

10 Life insurance (donation upon death) Amount of donation = death benefit Maximum tax credit of 100% of the net income for the year of the donor's death Any excess amount can be carried back to the previous year, up to 100% of the net income Planned giving through life insurance

11 Life insurance (donation upon death) Advantages: The donor retains control of the policy Upon death, the amount is paid directly to the charity Receipt issued for 100% of the value of the contract Ability to carry back if income is insufficient Disadvantages: No tax break during the donor's lifetime Credit could be lost if income is insufficient (death at the beginning of the year) Planned giving through life insurance

12 2.Policy assignment (donation of a new policy): The donor gets a charitable donation receipt equivalent to the annual premium Possibility for quick payment Paid-up insurance Two ways to donate a life insurance policy: Estate Charity Donor Owner Death benefit Insurer Planned giving through life insurance

13 Advantages: Offers a way to make a substantial donation Is no longer part of the donor's estate Receipt issued during the donor's lifetime Disadvantages: Transfer is irrevocable Long-term commitment: however, there are quick payment solutions Policy lapses if payments stop being made Two ways to donate a life insurance policy: 2.Policy assignment (donation of a new policy ) Planned giving through life insurance

14 Two ways to donate a life insurance policy: 2.Policy assignment (donation of an existing policy ) The donor gets a charitable donation receipt equivalent to the policy's cash surrender value For subsequent years, the donor gets a charitable donation receipt equivalent to the annual premium paid. Planned giving through life insurance

15 Charitable donations Federal tax credit 12.53% 24.22% First $200 Over and above $200 Provincial tax credit in Quebec 20% 24% Combined32.53% 48.22% Planned giving through life insurance * These calculations include the provincial abatement

16 Charitable donations Donation: $600 Tax savings:$258 Net cost of donation: $342 Planned giving through life insurance Quebec Amount of donation: $600 FederalTax Credit$ First $ %$25.05 Over $ %$96.86 Federal total:$ Provincial First $20020%$40 Over $20024%$96 Provincial total:$136 Combined total credit:$ Combined tax credit percentage:42.99%

17 Assumptions: 50-year-old woman - Life expectancy: age 83 $100,000 insurance - $5,000 premium payable in 7 years Planned giving through life insurance Insured(s) Death benefit: Sum insured + Fund Portion of accumulation fund payable automatically upon the death of each insured:100% CoverageMinimum Annual Insured 1:Genesis 5, Level cost$100, for life$1, for 50 years Jane Client Female, age 50, NS (non smoker) Total minimum annual premium for insured:$1, Premium Details Premiums at issue:Minumum annual premium$1, Maximum first-year premium for waiver of premiums$4, Premium frequency:Annual Premiums paid:As selected for 7 years$5,000.00

18 Planned giving through life insurance

19 YearAgeAnnual premium Donation if donor dies during the year Tax credit during donor's lifetime Tax credit if donor dies during the year 353$5,000$113,794$0$54, $5,000$120,335$0$57, $0$129,473$0$62, $0$128,968$0$62, $0$128,348$0$61,852 Option 1 Beneficiary designation Planned giving through life insurance

20 YearAge Annual premium Donation if donor dies during the year Tax credit during donor's lifetime Net cost of donation Tax credit upon donor's death 353$5,000$113,794$2,379$2,621$0 555$5,000$120,335$2,379$2,621$0 1060$0$129,473$0 1565$0$128,968$0 2070$0$128,348$0 Option 2 Policy assignment $16,653 Planned giving through life insurance

21 YearAgeAnnual premium Donation if donor dies during the year Tax credit during donor's lifetime Tax credit if donor dies during the year Annual donation amount Tax credit during donor's lifetime Net cost of donation Tax credit upon donor's death 353 $5,000$113,794$0 $54,834$5,000$2,379 $2,621$0 555 $5,000$120,335$0 $57,988$5,000$2,379 $2,621$ $0$129,473$0 $62,394$ $0$128,968$0 $62,151$ $0$128,348$0 $61,852$0 Option 1 Beneficiary designation Option 2 Policy assignment When does the donor want to receive the tax credits? $16,653 Planned giving through life insurance

22 When does the donor want to receive the tax credits? Upon his/her death (Beneficiary designation) During his/her lifetime (Policy assignment) Tax credit that increases the net value of the estate Annual tax credit Reduces the estate tax on realized gains upon death Choose a quick payment option The policyholder retains control of policy The policyholder no longer controls the policy Planned giving through life insurance

23 Type of donationOwnerBeneficiary In the will DonorEstate Beneficiary designation DonorCharity Policy assignment (Donation of a new policy) Charity Policy assignment (Donation of an existing policy) Charity Planned giving through life insurance

24 Type of donation Tax advantage Amount of donation Eligible maximum Amount to carry back In the willUpon deathSum insured 100% of the net income for the year of death Remainder up to 100% of the net income for the year prior to death Beneficiary designation Upon deathSum insured Policy assignment (Donation of a new policy) During the donor's lifetime Annual premium 75% of the net income for the year of the donation Remainder up to 75% of the net income for the next 5 years Policy assignment (Donation of an existing policy) During the donor's lifetime Cash surrender value (year of assignment) and annual premium (subsequent years) Summary of tax benefits Planned giving through life insurance

25 Conclusion There are many ways to give, but it's important to know how to give wisely... Talk to the professionals. Planned giving through life insurance