The Philanthropic Solution
Ted and Susan’s financial adviser developed a customized giving strategy for them through Canada Gives. First, he helped the Vandermeers open a Family Foundation Account so they could consolidate their donations, keep track of their tax receipts and focus their charitable giving. Initially, all of the donations will be one-time gifts, and the proceeds will be disbursed to the charities that Ted and Susan select each year.
In addition, Ted and Susan purchase a last-to-die life insurance policy, with the death benefit payable to their Family Foundation Account at Canada Gives. They select a permanent insurance product that allows them to pay their premiums over five years. Because they name Canada Gives as the owner and beneficiary, they can claim the premiums as a charitable donation and receive immediate income tax credits. Looking ahead, the benefit from this policy will provide an endowment that will maintain the same level of funding to charities after they have died.
By The Numbers
The insurance product they choose pays a benefit of $500,000 and carries an annual premium of $8,500, payable for five years. Because the Vandermeers are both in the highest tax bracket (46.41% in Ontario), their tax credits will reduce their net cost by almost half of this amount over the five years. Ultimately, for an after-tax investment of $22,776, Ted and Susan will establish a $500,000 future gift that will create a family legacy and provide “forever funding” for their chosen charities:
Financial Summary
| Annual life insurance premiums |
$8,500 |
| Total five-year cost (before tax credit) |
$42,500 |
| Charitable donation tax credit (46.41% tax rate) |
$19,724 |
| Net five-year after-tax cost |
$22,776 |
| Future gift to Family Foundation Account at Canada Gives |
$500,000 |
* Please note the example described herein is provided for illustrative purposes only. |
