Legacy Giving Made Easy

Pictured above is a savings group in Ethiopia, where donor support has enabled Chaltu and Laila to help their families and others in their community.

Here are some giving strategies I recently shared with a newly retired couple.

Meet Alex (70) and Susan (65), proud parents to their daughter Betty (35), who is married to Tom and has two young children. Alex and Susan approached us for estate planning. In addition to organizing their financial affairs, they were also current donors, having contributed $20,000 annually to a charity of their choice for several years.

They asked two main questions:

• How can we maximize the impact of our charitable donations?
• What are the best ways to pass on our wealth to the next generation?

Here’s how we answered.

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Strategy 1: Donate Unused Life Insurance

Alex and Susan had a $25,000 life insurance policy they no longer needed and were considering cancelling. Instead, we explored an option to donate the policy to charity —either by making the charity the owner and beneficiary, or just the beneficiary.

With this approach, they may be eligible to claim tax deductions on premiums either now or upon death, depending on the structure.

Rather than cancel the policy, they can now build a legacy.

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Strategy 2: Amplify Donations Using Life Insurance

Alex and Susan wanted to continue donating $20,000 annually until both have passed. To amplify their donation’s impact, we explored combining cash and life insurance within their charitable giving.

Scenario: Donate $20,000 annually for 10 years

Total donation over time: $200,000

Here are two blended strategies showing how the charity could use this gift:

Strategy A

• Charity keeps $5,000 in cash
• Uses $15,000 to buy a life insurance policy
• In 10 years: $50,000 in cash
• At life expectancy (age 86): $273,000 from the insurance
• Total benefit: $323,000 (vs. $200,000 if donated only in cash)

Strategy B

• Charity keeps $10,000 in cash
• Uses $10,000 to buy life insurance
• In 10 years: $100,000 in cash
• At life expectancy (age 86): $184,000 from the insurance
• Total benefit: $284,000

The impact is clearly amplified. If you were in their shoes, which strategy would you choose?

Note: These examples are for illustrative purposes only. Individual results may vary based on specific circumstances.

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Strategy 3: Turn Unwanted CPP Into a Legacy

Alex and Susan each receive CPP income totalling $26,000 annually. They were frustrated by the lack of flexibility and the taxes that came with it.

We proposed: Use their CPP income to purchase a life insurance policy, with the charity as owner and beneficiary.

Result:

Upon the death of the second spouse, the charity would receive a legacy gift of over $800,000 —and the tax on their CPP is effectively neutralized.

A smart way to turn taxes into charitable impact.

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Strategy 4: Keep the Wealth in the Family

Alex and Susan have a combined RRSP balance of $800,000, which will convert to RRIFs for retirement income. Upon the passing of one spouse, the RRIF rolls over tax-free to the surviving spouse.

What Happens After the Second Passing?

If $500,000 remains in the RRIF at that time, they initially assumed their daughter Betty would inherit it. But in Ontario, where they’re in the highest marginal tax bracket, 54% of the RRIF could go to taxes.

The Result:

• Betty receives: $230,000
• The CRA receives: $270,000

To solve this, we recommended they:

1. Use part of their CPP income to purchase a joint last-to-die life insurance policy for $500,000, with Betty as the beneficiary.
2. Leave the remainder of the RRIF to charity in their will.

Outcome:

• Betty receives $500,000 tax-free from the insurance
• The estate receives a tax receipt for the RRIF donation
• The charity benefits from the donated RRIF balance

Their family is financially whole, and a substantial charitable legacy is created.

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Should You Inform a Charity You’ve Included Them in Your Will?

While it's not required, it's highly recommended to inform the charity if you’ve included them in your estate plans.

Why?

• It helps them plan for the future
• Allows them to thank you properly
• Gives you an opportunity to clarify any intentions or preferences

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About the Author

Sisi is a Financial Planner and Master Financial Advisor in Philanthropy, with over 23 years of experience. He leads a boutique firm in Mississauga, Ontario, focused on Strategic Planned Giving.

In 2024, Sisi and AM Strategies launched a Charitable Life Insurance product to simplify and amplify giving. He is a member of the Estate Planning Council of Canada, and several other professional bodies.

Married to Smita for 34 years, Sisi enjoys travelling and actively supports various charities.

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Disclaimer

This article is for informational purposes only. It does not constitute financial advice or a legal opinion and does not create a client relationship. For personalized financial advice, please consult a qualified financial planner.

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