The following article was written by Rick Goldring, a member of our Gift Planning Services Committee:
Life insurance can help you change the world. While life insurance may not be as popular a mode for donations yet, more people are learning of the benefits. You can create a legacy that will impact our community beyond your lifetime too. And you don’t need to have millions to make great things happen.
How does using life insurance provide tax savings during your lifetime and also provide tax free funds upon your death to Hamilton Health Sciences Foundation or any other charity you wish work?
First, you purchase a new life insurance policy and donate the policy to the Hamilton Health Sciences Foundation in your lifetime. This makes Hamilton Health Sciences Foundation the new owner of the policy while you assume the annual premium for the policy of say, $10,000. Each year, you simply donate that amount to the Hamilton Health Sciences Foundation to pay the policy each year and you receive a tax receipt for the premium payment amount. Depending on your tax bracket, this could be a savings to you of up to $4,900. Upon your death, the charity receives the proceeds from the policy.
How much life insurance does a $10,000 annual premium provide?
It depends on your age, sex and whether you are a smoker or not. One of the ways to maximize the amounts that go to charity is to purchase a joint life and last to die life insurance policy that only pays out when the second spouse dies.
Let’s use the example of a couple, male and female, both age 80 who are non-smokers. The annual premium of $10,000 will buy a policy that will pay out $150,000 tax free to the charity upon the death of the second spouse whereas the same amount of $10,000 per year would result in $550,000 of coverage for a similar couple both age 60.
This is only one of many strategies using life insurance that can result in significant tax savings to you – the donor – and be of significant benefit to charities. Imagine the tremendous feeling of contribution and making a difference you will have knowing that when you’re gone, your legacy will live on.
Rick Goldring, B.A.,CFP,CLU,CH.FC.
The Bay West Group Inc.