Enhance Your Charitable Giving Using Life Insurance

Giving That Grows

Canadians donate billions of dollars to charity every year, and every one of those donations is eligible for a non-refundable tax credit. But there's a way to structure your giving so that both the size of your gift and the tax benefit are meaningfully larger than a straightforward cash donation — using life insurance.

Two Ways to Structure It

Personally Owned Life Insurance

You purchase a policy, remain the owner and payor, and name your chosen charity as beneficiary.

• Policy growth is tax-free, increasing the overall value of your eventual donation
• The charity receives the death benefit tax-free
• Your estate receives a tax credit of up to 100% of net income, usable in the year of death and the year immediately preceding it
• You retain access to the policy's cash value during your life
• You can change the beneficiary at any time

Charity-Owned Life Insurance

The charity becomes the owner and beneficiary of the policy, and you pay the premiums.

• You receive an annual tax credit equal to the premium paid
• The maximum annual donation credit is 75% of net income while living
• Unused credits can be carried forward up to five years
• The charity controls the policy and has access to its cash value

The Numbers Tell the Story

Consider a 60-year-old woman contributing $25,000 a year for 20 years, comparing a non-registered investment against a personally owned life insurance policy, both intended for charity at death:

• A non-registered investment produces a total donation of roughly $907,224 and a one-time tax credit of about $435,130
• The life insurance structure produces a total donation of roughly $1,027,431 and a tax credit of about $492,793 — an increase of over $120,000 in charitable impact and nearly $58,000 more in tax credit

A similar comparison for charity-owned life insurance against a charity-held investment (assumed at a modest 2% growth rate, reflecting typical disbursement quota constraints) shows an even larger gap — often increasing the ultimate charitable gift by 30% or more.

Which Structure Fits You?

The right structure depends on your income tax situation and when you want to use the credit — annually during your lifetime, or as a larger credit at death. In both cases, life insurance can materially increase the legacy you leave behind, without requiring a larger out-of-pocket contribution than you're already planning to make.

If enhancing your charitable legacy is a goal, it's worth exploring which structure fits your plans.