Back to the Future
June 18, 2019Financial Fitness
The science fiction comedy film, Back to the Future was released in 1985. It became the most successful film of the year and today it is recognized in the top ten films of the science fiction genre. It’s a quirky story about a teenager who is accidentally sent 30 years into the past in a time-traveling DeLorean invented by his friend, Dr. Emmett Brown. In the story, teenage Marty McFly, must ensure that his high school-age parents get together in order to save his own existence and protect his future.
As we consider the future history of our families, our communities and our world, let’s look back to those who shaped the future for us – generations of people who gave generously of their resources – leaving a legacy that we can appreciate today.
Whether we live for 50 years or 90 years, we each have the opportunity to do the most with what we have, in order to leave the world a better place.
When you donate a life insurance policy to your favourite charity or church, you get the opportunity to make a larger donation than you thought you could. Plus, you gain significant tax benefits as well.
Charitable Giving + Life Insurance = A wise thing to do because…
- Your charitable gift to a charity does not have to affect your bequests to your family.
- Life insurance increases the amount of your charitable donations for the relatively low cost of insurance premiums.
- Unlike a will, life insurance is not a matter of public record, and is not subject to the claims of creditors against your estate.
- A life insurance policy is not currently subject to probate fees or income tax, unlike the estate. In fact, as a charitable donation, life insurance creates a tax credit.
- Life insurance proceeds can often be payable earlier than the disbursement of the estate.
- You can name your charity as the beneficiary of a new policy or donate an existing policy.
- The flexibility of a life insurance policy allows you to structure a payment schedule that makes sense for you.
- You will leave a lasting legacy as a memorial to your life or the life of a loved one.
To use life insurance as a charitable gift you can…
Change ownership on a life insurance policy.
You pay the premiums and name your favourite charity as the owner. Since the owner of the policy is now the church or charity, they have control of the beneficiary designation. You will receive a charitable tax receipt for any cash value in the policy as well and an annual charitable tax receipt for the future premiums you pay to keep the policy in force. (If the value exceeds the tax cost of the policy, you must recognize the excess as income, as if you had cashed in the policy.)
Change the beneficiary on a life insurance policy.
You pay the premiums and simply name your charity as the beneficiary. Since you retain ownership of the policy you can change the beneficiary at any time if you’d like. Upon your death, the proceeds are paid to that beneficiary and your estate receives a charitable tax credit to be used against your final year’s income tax. The tax credit reduces tax payable and increases the amount that can be distributed to other beneficiaries.
If charitable giving is important to you, you can plan to leave a lasting legacy that will help to build a better world by giving a gift that keeps on giving.