Charitable Giving

Boosting Charitable Giving with Life Insurance and Flow-Through Shares

Charitable giving is a powerful way to support causes you care about while also achieving significant tax benefits. Two advanced financial strategies—using life insurance and flow-through shares—can help maximize donations and reduce tax liabilities, allowing donors to give more effectively.

The Role of Life Insurance in Charitable Giving

Life insurance is a highly effective tool for charitable giving, offering multiple ways to create a lasting impact while optimizing tax benefits.

Ways to Use Life Insurance for Charity:

1. Naming a Charity as a Beneficiary
   • By naming a charity as the beneficiary of a life insurance policy, the death benefit is paid directly to the organization, avoiding probate.
   • The donor’s estate may receive a charitable tax receipt to offset final taxes.
2. Donating an Existing Policy
   • If you have a life insurance policy that is no longer needed, you can transfer ownership to a charity.
   • You will receive a tax receipt for the fair market value of the policy at the time of donation.
   • Future premium payments made by the donor may also be eligible for charitable tax credits.
3. Purchasing a New Policy for Charitable Giving
   • A donor can purchase a new policy and name the charity as the owner and beneficiary.
   • Annual premium payments qualify for charitable tax receipts, reducing taxable income.

Using Flow-Through Shares for Charitable GivingFlow-through shares are a tax-efficient investment vehicle primarily used in Canada’s resource sector. They provide unique benefits when combined with charitable giving.How Flow-Through Shares Work:

• Investors purchase flow-through shares in eligible mining, oil, or renewable energy companies.
• The investor receives tax deductions for exploration expenses incurred by the company, reducing taxable income.
• Shares can then be donated to a charity, triggering a second tax benefit—eliminating capital gains tax.

Benefits of Donating Flow-Through Shares:

• Double Tax Savings: Investors receive both a tax deduction on the initial investment and an additional charitable tax credit when donating the shares.
• Elimination of Capital Gains Tax: Normally, capital gains are taxable when selling shares, but donating them to a charity results in a full exemption.
• Maximizing Charitable Impact: Since these strategies lower the after-tax cost of giving, donors can afford to contribute more.

Combining Strategies for Maximum ImpactBy integrating both life insurance and flow-through shares into a charitable giving plan, donors can significantly increase their contributions while optimizing tax benefits. This approach allows individuals to create a meaningful legacy while ensuring financial efficiency.ConclusionFor high-net-worth individuals and philanthropic investors, life insurance and flow-through shares offer compelling opportunities to boost charitable giving. Consulting with a financial planner or tax advisor can help structure these strategies effectively, ensuring donors maximize their impact while benefiting from valuable tax incentives.