Take your donation dollars further
Canada Life - Jun 01, 2023
Is charitable giving a part of your financial planning? Find out how you can take your donation dollars further
Charitable giving might be a part of your financial planning. But did you know that there are more ways than one to give back?
Charitable giving is a powerful tool that helps you enrich the lives of Canadians in the communities around you. Every year, thousands of non-profit organizations in Canada rely on others to help make an impact through a charitable donation of cash or gifts in kind.
From a financial perspective, this not only benefits the registered charity but donors too! Donors can use their donation tax receipt to reduce their taxes payable in that year, or they can choose to carry the amount forward (up to five years).
While giving can be simply donating directly to the registered charity, did you know there are other ways to give, too?
Giving through investments
It’s possible for you to donate to a registered charity using publicly traded securities like stocks, mutual funds, bonds, etc. When you donate using securities, capital gain tax is eliminated which lets you give more to the charity. You’ll generally receive a larger tax credit since your donation is larger, and the charity gets to keep the securities’ full value.
Giving through insurance
You can make a bigger impact with your donation using life insurance. This allows charities to maximize the amount they receive to advance their efforts and benefit our communities.
There are two basic ways to structure charitable giving using tax-exempt life insurance.
There are two basic ways to structure charitable giving using tax-exempt life insurance.
Approach one
In one approach, a donor owns the policy, pays the premiums, designates the registered Canadian charity as the beneficiary and, can through their estate, achieve the tax benefits on death.
| Policyowner | Premiums | Beneficiary | Donation tax receipt |
|---|---|---|---|
| Individual | Donor pays regularly | Registered charity | On death - provided to donor’s estate |
Approach two
In another approach, a donor chooses a charity, who is both the owner and the beneficiary of the policy. The donor pays the premiums and achieves the tax benefits while living.
| Policyowner | Premiums | Beneficiary | Donation tax receipt |
|---|---|---|---|
| Registered charity | Donor pays regularly | Registered charity | As premiums are paid - provided to donor |
With both approaches, the client must maintain the on-going payments for the premium duration of 10 or 20 years, or to-age-100, for the charity to receive the insurance payout.
A new approach
Recently, Canada Life released a new product called Canada Life My Par GiftTM. Here’s how it works.
A donor chooses a registered Canadian charity*, who is both the owner and the beneficiary of the My Par Gift policy. The donor makes a one-time premium payment to Canada Life, or the charity, to be applied as premium for the policy. The charity then issues the donation tax receipt to the donor.
| Policyowner | Premiums | Beneficiary | Donation tax receipt |
|---|---|---|---|
| Registered charity | Donor makes a one-time payment | Registered charity | Issued by the registered charity - provided to donor |
Added benefits
My Par Gift is a participating life insurance policy that can help the charity through potential dividends. Charities can use the policy’s dividends to purchase additional life insurance, which may increase the payout on death and the policy cash values, or they can take the annual dividend as cash to create an annual cash flow.
My Par Gift gives the charity flexibility. As the policy cash values build over time, the charity as policyowner could access these funds for their use.
Want to learn more about charitable giving? Contact me today!
* A registered charity is an organization that is registered as a charity with the Canada Revenue Agency.
Ask an advisor: Giving to charity using life insurance – Canada Life
Learn how giving to charity with life insurance lets you make your mark today and grow your impact for tomorrow.
View video script
Description: Description: This animated video introduces a character named Bill and his advisor with illustrated graphics to show how you can give to charity using life insurance.
Text: Ask an advisor” appears. The camera zooms out as the text lands in an outlined square. “How can I give to charity using life insurance?” fades in below. An illustration of a hand holding a heart appears on the right side of the frame.
Bill: I want to use some of my money to support charities that are important to me. How can I do that?
Description: Bill and his advisor sit opposite one another in a room setting.
Advisor: There are lots of ways to give, but one way to enhance your donation is with life insurance.
Description: Screen transitions to an illustration of a life insurance policy.
Advisor: Your donation is the life insurance policy.
Description: The life insurance policy illustration moves to the left of the screen, and an illustration of stacks of coins appears to the right of it.
Advisor: When you die, the charity gets the payout on the policy which is generally larger than your original donation.
Description: The illustration of the stacks of coins gets larger than it was originally.
Bill: Would I still get a tax credit?
Description: Screen transitions to an illustration of Bill talking.
Advisor: Of course. One of two ways. If the charity is the policy owner and beneficiary, you’ll get a donation tax receipt for your premium payments from the registered charity.
Description: Screen transitions to 2 illustrations. To the left is an illustration of a hand holding a heart with text “Policyowner and beneficiary” below it. To the right is an illustration of a document and per cent sign with the text “Tax credit for premium payments” below it.
Advisor: Or, if the charity is the just the beneficiary, your estate gets a donation tax receipt when you die.
Screen transitions to 2 illustrations. To the left is an illustration of a hand holding a heart with text “Beneficiary” below it. To the right is an illustration of a document and per cent sign with the text “Donation tax receipt when you die” below it.
Bill: This sounds like a great way for me to make my mark today and grow my impact down the road.
Description: Screen transitions to Bill and his advisor sitting opposite in a room setting.
Advisor: Excellent. Let’s talk about using life insurance to support your favorite charity.
Description: Screen transitions to white background with text: Let’s talk about using life insurance to support your favorite charity.
Canada Life logo appears. Legal text appears: Canada Life and design are trademarks of The Canada Life Assurance Company. canadalife.com 1-204-946-1190.
This information is general in nature, and is intended for informational purposes only. For specific situations you should consult the appropriate legal, accounting or tax advisor.
Canada Life and design are trademarks of The Canada Life Assurance Company.