Charitable Giving

The greatest tax break that many Canadians do not take advantage of is charitable giving.

Most people know the CRA provides a tax credit for donations to registered charities. Fewer people realize that life insurance can also be used as part of a charitable giving strategy.

Here are three approaches that can work well, depending on your situation.

If you have an unusually high-income year, a single premium life insurance strategy can create a larger charitable impact than donating cash alone. You receive the tax credit in the year you need it most.

If you expect a significant tax bill in the future, such as selling a cottage or a large tax liability on the final return, a life insurance policy with a charity named as beneficiary can create a charitable gift at death. The resulting tax receipt can help reduce, or in some cases eliminate, taxes owed by the estate.

If cash flow is strong and likely to continue, you can structure a similar plan but claim charitable tax credits during your lifetime by donating the policy or using an arrangement where premiums qualify for a charitable receipt.

There is also a corporate strategy, but it is more complex and situation-specific.

If you’d like to see how these strategies could support your charitable goals and overall plan, simply send us a note.

Dennis