Life Insurance

Have you ever wanted to make a large life-changing gift but felt you could not afford to? Life Insurance allows you to leave a gift that can keep a broadcast on the air with just a small outlay. You can use an existing policy or perhaps start a new one.

You may have an insurance policy you bought years ago that you no longer need. You can name TWR Canada as the beneficiary. When you die all of the death benefit goes to TWR Canada tax-free! Your estate receives a charitable gift receipt for that amount as well, to reduce the taxation in your estate. This would help offset the taxation triggered by an RRSP, RRIF, or property that had increased in value, such as a cottage.

As an alternative, you could give the policy to TWR Canada now. You would receive a charitable gift receipt now for the Fair Market Value (FMV) of the policy. The FMV of the policy would be the Cash Surrender Value and may be significantly more depending on other circumstances such as your health. You would also receive a charitable gift receipt for any premiums you continue to pay. At death TWR Canada receives the death benefit tax-free. In this case there would be no receipt issued for the insurance proceeds at death since you were receipted when you gave TWR Canada the policy.

You may want to consider starting a new policy for the same reasons. A small yearly premium can generate a larger gift and maybe a large reduction in your estate tax bill. It is important to note that the gift of insurance is very private. You can arrange for only yourself and TWR Canada to know about your gift. You also avoid paying probate fees. Insurance policies are competitively priced today and some policies do not require any medical information. You should not assume you are too old or not healthy enough to start a policy.

Example 1

Bill and Mary are both 65. Over the years they have given to TWR Canada's Persian ministry. “We wanted to continue to give through our estate,” said Mary, “and see the programs continue for many years, when we can no longer help.” For a yearly gift of $1,555 they can arrange a policy for $100,000. If TWR Canada owns the policy, Bill and Mary can tax deduct the premium so it is only costing them $1,000 each year. “We just made this part of our yearly giving.”

This is a joint second-to-die policy that gives $100,000 to TWR Canada tax free when both Bill and Mary have died. As an example, if Mary dies second when she is 90 they will have paid 25 times $1,000 or $25,000. They will have earned 9.5% after tax every year on the money invested. Insurance will provide a large return for a small investment.

As an alternative Bill and Mary can own the policy instead of TWR Canada. They cannot tax deduct the premium BUT their estate would receive a tax receipt for the $100,000 gift made to TWR Canada. This might reduce their income tax by as much as $48,000. This deduction can be used to give more to their family or other charities and less to the government.

Example 2

David and Rebecca are both 35. They would like to use life insurance to give a large gift but expect to live for many years. They could pay for the premium for a policy insuring Rebecca’s mother Lucille who is 67. A $100,000 policy would have a premium of $2,869 but David and Rebecca can deduct the premium as a gift. The actual cost would be $1,750 per year. If Lucille lived till she was 87 the funds invested would have grown by 9.2% every year after tax to reach $100,000.

In all of these cases a smaller insurance policy would have a proportionally smaller premium and vice versa.

Example 3

Jean has an old life insurance policy she bought when her children were young. She no longer needs the coverage. The insurance coverage is $12,300 and the cash value is $4,500. If she gives the policy to TWR Canada, she receives a charitable gift receipt for $4,500, reducing her taxes by $2,070. When she goes to glory, TWR Canada will receive $12,000 tax free from a donation that only cost $2,430. Her gift has multiplied fivefold.

Note:  Please consult with us or your Advisor before acting on this information as rules may vary from province to province and can change over time. Knowing your situation allows us to personalize our recommendations. Last updated July 2016.