PLANNED GIFT GIVING
LEAVING A LEGACY
Philippians 4:19 – And my God will meet all your needs according to his glorious riches in Christ Jesus.
When we have been successful with the gifts God has given us, it is natural to want to give back. I recently spoke with a man who gives a generous tithe at church every week, and has done so for years. When I suggested using a legacy insurance product to maximize the effects of his giving, his immediate response was “Why would I? I already have life insurance.”
My client’s confusion is understandable, and yet one of the biggest obstacles I encounter in my work as an insurance advisor is the lack of information out there on the ways insurance can be used in charitable giving. Legacy insurance is different than regular life insurance, but the differences might not be immediately apparent. Legacy insurance policies are a way to maximize your charitable donations while also minimizing taxes. By using an insurance policy, you can support your church or favorite charity in a more significant way than you might otherwise be able.
For example, my client was giving $100 each week at church. With that same $100/week he would be able to purchase a one million dollar life insurance policy, which is payable to the church and guaranteed on his passing. The policy would also be paid up in twelve years, meaning that he will not have to make another payment after the twelfth year of the policy. At this point, he can revert to giving his weekly donation directly to the church, or even purchase another insurance policy.
The multiplication of your giving is only one advantage of a legacy insurance product. This type of policy allows you to receive as well as give. Legacy insurance can provide significant tax benefits, either during your lifetime or after your passing, depending on how the policy is set up.
If the charity is designated as the policy owner, each premium payment can be written off as a charitable donation. This type of setup uses your policy as a tax relief during your lifetime, but does not allow you to change the charity that will be your beneficiary.
On the other hand, you can retain ownership of the policy. In this case you would either name the charity as the beneficiary of the policy or name your estate the beneficiary, with the proceeds of the policy designated as a bequest to the charity of your choice. The charity will write a tax receipt to your estate in the amount of the payment received. This arrangement can significantly reduce capital gains and other taxes on your estate and increase the money received by your heirs. It also permits you to easily change the charity that will benefit from your policy.
Giving through a legacy policy enables churches and other charities to establish cash flow and invest in capital projects that otherwise may not have been possible. Buildings and renovations, ambitious programming, and much-needed staff are often paid for using life insurance policies. Using creative planning, a legacy insurance advisor can help you to give more than you might have imagined possible, while providing you and your estate with tax shelter. Your dream for a lasting legacy is as individual as you are, and with your input a legacy insurance specialist can give you a plan to make that dream a reality.
Isaac Allen is a Legacy Advisor, insurance specialist with Palladium Insurance in Ottawa, www.palladiuminsurance.ca.