Supersizing Your Donation!!
Supersizing Your Donation: How Life Insurance Can Amplify Your Philanthropic Goals
When it comes to charitable giving, most people think of simply just writing a cheque. But what if you could do more with your donation? If you’ve been giving money annually, or considering giving annually, you might be surprised to learn that using life insurance could significantly enhance your philanthropic impact. Let’s explore how you can supersize your donation with life insurance versus just donating cash.
The Power of Cash Donations
Donating money each year to your favourite charity is undoubtedly generous. It provides immediate support for programs and initiatives that can make a difference. Cash donations are straightforward, and charities can utilize the funds right away to meet their urgent needs. Let’s say, for example, you donate $5000 annually to your favourite charity. Those funds can have an immediate impact, are flexible in how they can be used, and also provide you with tax benefits.
However, while cash donations are impactful, they can also be limited by your current financial situation. Once you donate, that money is gone—there’s no way to reclaim it or increase its value over time. Also, $5000 is only $5000. This is where life insurance can offer an intriguing alternative.
Supersizing Your Impact: A Comparison
Many individuals are now using Life Insurance as a tool to maximize their impact, significantly enhance their charitable giving and also boost their tax benefit. Let’s use an example of one of our clients who switched to this strategy. We will break down the financial implications of donating cash versus using life insurance, using $5,000 annual donation as an example.
Cash Donations
- Annual Contribution: $5,000
- Total Over 10 Years: $50,000
- Charity – SickKids Foundation (from the Hospital for Sick Children)
The client was donating $5,000 a year, which over 10 years, would have been a total donation of $50,000. While this money can help fund projects, it’s limited to what the client can give each year. Also, if they were to pass away during that time, the donations would stop, and the impact would be limited to what they were able to specifically provide during those years (i.e. if the client passed away after 5 years, the charity would only get $25,000 over that time).
Life Insurance Donations
- Annual Premiums: $5,000 (40 year old male, normal health, for a policy with a death benefit of $342,920)
- Total Contributions Over 10 Years: $50,000
- Death Benefit from day 1: $342,920
- Benefitting Charity – SickKids Foundation
Through our strategy, the client was able to purchase a permanent life insurance policy with an annual premium of $5,000, and a benefit of $342,920 upon their passing - almost 7 times what you would have given in cash donations after 10 years. Now, although SickKids Foundation wouldn’t receive any actual cash during the client’s lifetime, they are guaranteed to receive at least $342,920 at the time of the passing, which actually significantly enhances what they would receive in total. The kicker? This amount would be from day 1, no matter when the client were to pass away.
As an added bonus, the client’s overall tax benefit would also be substantially higher than if they were to just donate cash every year. The way we were able to structure the policy, the benefit would be many multiples of what it would have been through just a cash donation.
Even though cash donations are great, many charities actually prefer to receive lump sum benefits through Life Insurance, as it actually allows for much more in the way of dollars received, so they are able to better fund their initiatives and programs, thus giving more back to those in need.
Additional Benefits of Life Insurance Donations
1. Leverage: You can leverage your annual contributions into a much larger sum, allowing your charity to fund long-term projects or initiatives.
2. Estate Planning: Life insurance can play a key role in your overall estate plan, ensuring that your charitable intentions are honoured while potentially minimizing estate taxes.
3. Emotional Legacy: Knowing that your donation will continue to support your chosen cause even after you’re gone can provide peace of mind and a sense of fulfilment.
While donating cash is a straightforward and commendable way to support your favourite causes, considering life insurance as a donation tool can significantly amplify your impact. By leveraging your annual contributions, you can ensure that your charity receives a much larger sum, creating a lasting legacy and making a difference in ways that cash alone cannot achieve.
If you’re passionate about philanthropy and want to explore innovative ways to maximize your impact, we can help you navigate the options that best suit your goals. With the right strategy, you can supersize your donation and leave a meaningful mark on the causes you care about.