Donating Life Insurance Benefits • FaithLife Financial Blog

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Donating Life Insurance Benefits

July 6, 2021Living Generously

The primary job of life insurance is to protect your family. But it also has the power to become a meaningful gift and a generous addition to your legacy.

But did you know? How much you give depends on how you give.

Alphabet letter wooden blocks with words GIVE in child and parents hands.

For example, naming a charity as a beneficiary (i.e., the person(s) you choose to receive your life insurance payment in the event of your death) on your life insurance policy has the potential to make your donation even bigger. And this is just one of several ways to make a lasting impact on the causes you care about most.

To make sure your donation goes as far as possible, let us help you plan ahead to maximize your donation. It all comes down to how you give. Below are two examples of what you can do with your insurance policy today — to make sure tomorrow is taken care of.

1. Designate a charity as the beneficiary of your existing life insurance policy.

If your loved ones are financially secure thanks to other assets, you may decide to keep your coverage and name a favourite charity as the beneficiary of the policy.

What it means for you:

  • You maintain control of the insurance policy.
  • The death benefit (i.e., a payment made to designated family members, other loved ones, or the charity of your choice after you die) qualifies as a tax credit on your final personal income tax return.
  • The death benefit isn’t taxed because it’s not considered part of your estate.
2. Donate your policy to a charity.

This option requires the greatest amount of planning because there any many conditions that must be met before you can assign a life insurance policy to a charity. You will likely need to engage a team of tax and estate planning specialists to help you navigate through regulations and confirm that you can make this kind of gift to the charity you’ve chosen to reward.

What it means for you:

  • You receive annual donation tax credits to offset your personal income tax.
  • Monthly or annual premiums (i.e., the amount you pay for an insurance policy) help to automate your charitable giving.
  • Your qualifying charity can plan accordingly, knowing the donation will occur at some point in the future.

Let’s find the right answer for you

Legacy planning is powered by simple ideas like caring and sharing. Getting it right requires a lot of coordination and expertise. Before you commit to donating life insurance benefits, speak to a FaithLife Financial Representative so we can help you plan for the legacy you want to leave behind.

This blog post contains general information only. Because each person’s situation is unique, it is best to speak with a qualified professional before making any final decisions. FaithLife Financial does not advise clients on tax, accounting, or legal matters.