The Gift of Life Insurance
A creative way to increase your gift and leave a substantial legacy to the church
For a comparatively small cost, you can provide a large gift to your congregation, The Presbyterian Church in Canada, and/or another area of ministry, through the gift of life insurance.
Many donors would like to make significant contributions to their congregations and other areas of ministry; however, they may not have the financial resources to make a large gift during their lifetime. A life insurance gift can be a creative way to make a meaningful gift that you didn’t think was possible. You can make a gift of either a new or existing policy.
Benefits of Gifting Life Insurance
Satisfaction – Knowledge that your legacy gift will support transformational mission and ministry far into the future.
Simplicity – Policies are easily obtained through an insurance company or broker.
Doing What Seemed Impossible – Depending on health and age, you create a substantial future gift with small or modest premium payments now.
Tax Benefits – The final value of your policy will be far greater than the premiums you pay. Tax credits for those premiums could help offset your costs even more.
Peace of Mind – A gift of life insurance does not reduce the size of your estate.
Direct – The gift goes directly to the church upon your death and is not considered a part of your estate. In this way, you avoid probate and other administration fees.
The Advantages of a Gift of Life Insurance
When the church is the owner and beneficiary of your policy, you can receive a charitable tax receipt for every dollar you pay in premiums.
Since gifts of life insurance flow directly to the church outside the estate, your gift is not delayed while the estate is being settled and there are no deductions for probate or estate administration fees. A new insurance bequest for the church does not reduce the size of your estate. Policies are available through most insurance companies, or you can modify an existing policy to provide a charitable bequest.
Ways to Give Using Life Insurance
You can transfer the ownership of an existing policy. The church will issue you an immediate tax receipt for a portion of the policy’s cash surrender value, if any. If you continue to pay annual premiums after transferring the policy, the church will issue regular tax receipts (and no tax receipt will be issued to your estate). Use the receipt for this year’s income tax return (up to 75% o your net income) and carry forward any unused portion for up to five years. (Note: there may be a tax liability when you transfer ownership of the policy to the church.)
If you already have a policy, you can change the beneficiary to The Presbyterian Church in Canada or your congregation. Because this is a revocable gift, we are unable to issue you an immediate tax receipt, but your estate will be issued a receipt for the entire amount of the life insurance policy in the year the gift is received. This receipt can be used on your final tax return (up to 100% of your net income, with unused credits applicable up to 100% of your net income for the previous year).
You can purchase a new policy with the church as owner and beneficiary. The church will then issue a tax receipt for the annual premiums you pay after transferring the policy. In this case, no tax receipt will be issued to your estate because you benefit from the tax relief during your life. This is a creative way for those who are younger and may not have substantial assets to leave a significant legacy to the church.
Combine life insurance with another planned giving vehicle. For example, you could use the extra income you receive from a charitable gift annuity to purchase a life insurance policy. You could use this insurance to increase your legacy to the church or to provide a substantial inheritance for your heirs.
How a Gift of Life Insurance Works
Ms. Lee, aged 45, wanted her congregation to receive a significant gift to help replace her annual givings to the church after she dies. However, she needed to keep her current capital assets intact. Ms. Lee learned that she could get a “term‐to‐100” life insurance policy of $150,000 that is guaranteed to be paid in 10 years. As a non‐smoker, her policy will cost about $3,000 per year.
| Total premiums paid (10 years x $3,000) | $30,000 |
|---|---|
| Total amount of charitable receipts issued | $30,000 |
| After-tax* cost of policy | $16,200 |
| Total gift to the church will be | $150,000 |
Because of the charitable donation receipts she received, Ms. Lee was able to provide a substantial future gift of $150,000 for her church for a net after‐tax cost of only $16,200. *Assumes a combined provincial and federal charitable tax credit of 46 percent (after the first $200 in charitable givings. Note: Provincial tax credit rates differ).
Creative Uses of Life Insurance
Convertible Existing Policy
Mr. Park has a term life insurance policy which is coming up for renewal. He is considering dropping the policy because he no longer needs it for his original beneficiary. In talking with his broker, however, he discovers that the policy can be converted to a universal life policy for which he is pre-approved without a medical exam and which will provide a $100,000 death benefit. By making the church the owner and beneficiary of the policy, Mr. Park will receive a tax receipt for the amount he pays in premiums.
Special note: not all term life insurance policies are convertible; contact your insurance agent for advice.
Purchasing a New Policy
Mr. and Mrs. Flores want to contribute to their congregation’s capital campaign, but they are concerned that their gift would diminish the amount available for their children’s inheritance. After hearing about the use of life insurance for wealth replacement, they decide to give $100,000 to the church and use a portion of the $48,000 they will realize in tax savings from their donation to purchase a “second-to-die” life insurance policy to add $100,000 to their estate when the surviving spouse dies. Both the church and their children will benefit from their generosity and foresight.
Special note: the above example assumes a 48% tax credit. Tax credits vary from province to province.
Meet One of the PCC’s Visionary Givers
Bob Shaw is a member of St. John’s Church, Milliken, in Toronto, where he has served as an elder since 1960. He had already included his local congregation along with his children as beneficiaries in his will, but he also wanted to leave something for the work of the national church. “While serving on the Life and Mission Agency Committee, I became aware of the valuable work being done by the national church,” Bob said. “I wanted to give something to support that work after I die.” After consulting with his financial advisor, Bob decided that a gift of life insurance would enable him to leave a larger legacy than would otherwise be the case.
Bob has designated his gift for Presbyterians Sharing. “I didn’t want to be more specific than that, because I know that circumstances and needs change, and I want the gift to be used wherever it is most needed and can do the most good.” By making The Presbyterian Church in Canada the owner and beneficiary of the policy, Bob will receive a donation tax receipt for every dollar he pays in annual premiums.
Resources
Bulletin-sized Booklet: Guide to Planned Giving
Explore different ways to support ministry with this easy-to-read guide outlining the different ways of making a planned gift and their tax advantages.
Leaving a Legacy to Your Church: Talking about Bequests
Are your church members mortal? Yes! Is your church pretending that they’re not? Probably! Would receiving a bequest
benefit your church? Yes! Does your church need help broaching this topic? This webinar will provide practical tools for talking specifically about bequests in your congregation.
For More Information
The Stewardship and Planned Giving staff are available to help you turn your philanthropic wishes into reality.
To learn how a Charitable Gift Annuity or other planned gift can leave a lasting legacy, please contact us
Charitable Registration No. 10785 6619 RR0001
The information on this page does not constitute legal or professional advice and should not be substituted for appropriate professional advice. The Presbyterian Church in Canada strongly recommends that you seek professional legal and financial advice to ensure your financial situation and those of your dependents are considered; that your tax situation is reviewed; and that your legacy gift is tailored to your circumstances.